Why Is KE Holdings (BEKE) Stock Up Today?

What’s going on with KE Holdings (NYSE:BEKE)? Shares of the Chinese real estate company are up over 50% today. KE owns subsidiaries Beike and Lianjia. Beike operates as a digital real-estate brokerage for housing transactions, renovations, rentals and other services. Meanwhile, Lianjia is a leading property brokerage in China. KE launched Beike in 2018, building on top of Lianjia’s success. So, what exactly explains BEKE stock’s price action today?

An illustration of a miniature house with a "for sale" sign popping out of a smartphone.
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Why Is BEKE Stock Up Today?

The People’s Bank of China (PBOC) announced several new developments concerning regulatory policies. One of these developments is a promise to “resolve risks around property developers.” While the PBOC didn’t go into detail about how it plans to resolve these risks, the announcement came at an opportune time for Chinese stocks.

Before today, KE had lost more than 50% of its market capitalization year to date (YTD). Meanwhile, the iShares MSCI China (NASDAQ:MCHI) exchange-traded fund was down more than 25% YTD before today.

In addition, China announced that it would not move forward with its property tax trial. The country decided to back off from its plan of increased taxes in the face of a housing slump and a growing presence of Covid-19. Last October, China had announced that it would start taxing more residential properties in certain areas.

During February, new home prices in 70 Chinese cities fell by 0.13% when compared to January. Furthermore, prices in the secondary home market fell by 0.28%. It appears that China will wait for a housing market recovery before levying further taxes. As a result, Chinese homebuyers should have more incentives to purchase homes.

The Bottom Line on KE Holdings

KE reported fourth-quarter results last week, posting revenue of $2.8 billion, down 22% year over year (YOY). In addition, gross transaction volume came in at $114.9 billion, which was down 35% YOY. However, the company said it is seeking to overcome the “sharp market downturn” through a business model that will “optimize operations and advance our strategies.”

CEO Stanley Peng also announced efforts to alter KE’s strategy by enabling a “one body, two wings” framework. Peng explained that “‘One body’ refers to our core, which is our existing and new home transaction services business, while ‘two wings’ refers to our home renovation and furnishing offering, and our inclusive housing services.” The company is also actively investing capital back into itself, which will “impact the overall group’s profitability in 2022.”

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.


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