A nascent housing market rebound and a rally in shares could trigger a new round of cash raising by Chinese developers, eager to replenish coffers to meet rising demand, spurred by Beijing's economic stimulus measures.

The past few weeks have seen a steady stream of property firms eyeing IPOs, bond and share placements in anticipation of a real estate recovery. But experts caution that new investors could be left in the cold if the fragile recovery fizzles out.

If more fund raisings continue, it will surely put pressure on the stock prices which may trigger a correction in the short term, said Davina Tang, a senior fund manager AT Guotai Junan Assets (Asia).

But we're still positive on China's property market in the long run due to the increasing disposable income of households.

On a monthly basis, Chinese property prices rose 0.8 percent in June, compared with a rise of 0.6 percent in May. Year-on-year real estate investment growth quickened to 9.9 percent in the first half from 6.8 percent in Jan-May, based on government statistics.

China looks set to hit its full-year growth target of 8 percent after a surprisingly strong second quarter notable for a surge in investment driven by powerful fiscal and monetary stimulus.

And unlike more mature markets in the region, such as Hong Kong and Singapore, where land supply is limited, local Chinese governments are eager to see more property development to meet demand in the country where the wealthy class is growing.

China's biggest home builder, China State Construction Engineering Corp, parent of China Overseas Land and Investment Ltd (0688.HK) and China State Construction International Holdings (3311.HK), is launching the biggest IPO this year in the country to raise $5.9 billion.

Shimao Property's (0813.HK) Shanghai Shimao (600823.SS) unit plans to sell $293 million new shares in Shanghai. And Evergrande Real Estate Group, which suspended its $2.1 billion Hong Kong IPO in March 2008, also intends to resume its listing plan in the near future, local media reported.

These follow a batch of Chinese developers that raised more than HK$25 billion ($3.23 billion) via new share and bond issues in the first six months of this year.

For sure, more will come as there are a lot of development opportunities in China, said Adrian Ngan, an analyst at CCB International Securities. More than 10 property IPOs are seen queuing up for listing in Hong Kong and I bet at least one or two will come in the fourth quarter, he said.

INFLATED VALUATIONS

China's listed property firms are taking advantage of recent market rallies as they rush to build their war chests.

The Shanghai property sub-index .SSEP has jumped about 160 percent this year, beating a 75 percent surge in the benchmark Shanghai index .SSEC, the world's best performing market this year, and a 29 percent rise in Hong Kong .HSI.

The rally comes as China's property sector begins to recover after favorable government policies such as cheaper mortgages and lower downpayments for buyers.Valuations of Chinese real estate stocks have improved, making it more attractive for companies to issue new shares.

Chinese property stocks are trading at 2.1 times their book value, above a historical average of 1.8 times, Citigroup said in a report.

Buyers of new shares and bonds are hoping to cash in on the rise in both stock and real estate markets, but they could also see their investments shrink if markets get flooded with new issues, or if the housing recovery stumbles.

Companies with relatively high gearing and a poor track record on land acquisitions, including Country Garden (2007.HK), R&F Properties (2777.HK), KWG Property (1813.HK) and Agile Property (3383.HK) figure among Citigroup's top sell list.

It favors developers that have completed funding recently, such as China Overseas Land (0688.HK) and China Resources Land (1109.HK), as these firms should be able to buy new land to grow and concerns of potential dilution should ease in the near-term.

Any possible sudden halt to China's real estate recovery also remains a major worry for investors.

Media reports on potential tightening of mortgage lending in some Chinese cities has triggered a pullback in share prices.

My view is that the words are still much louder than action as the government is still very anxious to safeguard the GDP growth of 8 percent, said David Ng, Head of regional property research at RBS.

($1 = HK$7.750)

(Reporting by Alison Leung; Editing by Anshuman Daga)

China