Morgan Stanley bearish on China Building Materials Sector

Morgan Stanley believes second quarter pricing for China’s building materials will still be lower than the first quarter as it expects 2Q demand seasonal recovery to be weaker than normal years due to the slowing construction pace of property developers.

“We hold the view that developers will not reaccelerate construction activities until they have cleared their four-year high property inventories,” In addition, the supply side is facing pressure as well, especially from new capacity additions of about 24Mt (five per cent Eastern China in 1H12.

MS adds that risk to its view is a sharp recovery in property sales resulting in rapid digestion of property inventory and re-acceleration of construction activities. (Source: Dow Jones News)