(Refiles to fix bank name in first paragraph)

ABN AMRO Private Banking has upgraded property developer CapitaLand Ltd to 'buy' from 'hold', with a target price of S$2.93, citing policy loosening and rate cuts in China.

Shares of CapitaLand were up around 3 percent at S$2.71 and have gained about 22.6 percent so far this year, versus the Straits Times Index's 6 percent gain.

While first-time homes still make up the bulk of sales, upgrader demand has returned on the back of China's interest rate cuts, its first since the global financial crisis, ABN AMRO said.

China makes up around 30 to 40 percent of CapitaLand's revalued net asset valuation, it added.

Average selling prices for residential properties in Beijing and Hangzhou are down 25 and 37 percent respectively since 2011, but are falling at a slower pace helped by a recovery in sales volumes, ABN AMRO said, adding the company does not have significant unsold inventory.

However, CapitaLand management does not expect the housing market to ease significantly until mid-2013, when there is potentially more clarity on housing policies, ABN AMRO said.

"Management intends to focus on Beijing, Shanghai, Chengdu and Chongqing going forward, where it believes it has enough scale and product edge to differentiate itself from competition," it said.

1514 (0714 GMT)

(Reporting by Leonard How in Singapore; leonard.how@thomsonreuters.com)