There is one interesting phenomenon worth noting in China. While there are a huge number of unsold new home inventories in China's property market, the property prices are soaring in the first-tier cities.

This confusing picture was illustrated by China's official property price index which covers 70 cities. Data showed that the property prices grew by 51.9% y/y in Shenzhen, 17.5% in Shanghai, 10.3% in Beijing and 9.9% in Guangzhou. Other than the major cities, the property prices are still generally soft in lower-tier cities.

Extremely accommodative monetary policy followed by the PBoC could be a possible explanation to this phenomenon. The property market in the first-tier cities is considered as the "safe heaven" and attracts a lot of attention. That said, the properties with good location have been seen as "financial assets", rather than "commodities". Therefore, the asset inflation is a reflection of excess liquidity and lack of alternative investment vehicles.

"In our opinion, this is another asset bubble due to extremely accommodative monetary policy, will not change our macro view on China," said Commerzbank in a research note.