Markets

Stocks down amid talk of tighter property curbs

By Zhang Shidong (China Daily)
Updated: 2010-09-09 15:05

SHANGHAI - Mainland stocks fell, dragging the benchmark index from a four-month high, as speculation the government will step up property curbs overshadowed gains by metals producers on the prospects output curbs will boost prices.

China Vanke Co dropped the most in two weeks after the 21st Century Business Herald said measures may include stopping loans to developers. Industrial Bank Co, part-owned by a unit of HSBC Holdings Plc, and China Merchants Bank Co slid at least 2 percent. Aluminum Corp of China Ltd gained 2.2 percent as China International Capital Corp said China's plan to cut energy usage may boost aluminum makers on likely production cuts.

"The first round of tightening hasn't met the government's objective of bringing down property prices," said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co, which oversees $285 million. "The current pickup in the property market has led to speculation that there will be more severe measures including a property tax."

The Shanghai Composite Index lost 3.07, or 0.1 percent, to 2695.29 on Wednesday, falling from the highest since May 12. The CSI 300 Index retreated 0.1 percent to 2980.97 on Wednesday.

A gauge of financial and property stocks in the CSI 300 slid 1.7 percent, the biggest drop among the 10 industry groups.

"The key drivers of the property bubble are excess liquidity and lack of investment alternatives, which are still largely in place," said Ken Peng, a Beijing-based economist for Citigroup.

Extra tightening measures may include restrictions on pre-sales of apartments and curbs on the discounts banks can offer on mortgages, according to Citigroup's Peng.

The 21st Century Business Herald said the new measures may include stopping loans to real estate developers, compulsory lowering of home prices and a ban on third-home purchases. The report cited an unidentified person close to the Ministry of Housing and Urban-Rural Development.

Housing transactions in the southern city of Shenzhen jumped 84 percent in August from July, according to real-estate data provider Soufun Holdings Ltd. Sales rose 56 percent in Guangzhou, 31 percent in Shanghai and 23 percent in Beijing, it said. Government real-estate market data is scheduled for release as soon as Sept 10.

China should defend its turf, says Supachai Related readings:  Bank, property stocks drive Chinese share market lower  China's stocks close higher Tuesday  Stocks edge up on expectations of rosy exports  China's stocks close higher Monday, led by heavyweights

Reports that Chinese regulators will force lenders to boost loan-loss reserves are negative for medium-sized banks, Morgan Stanley said.

China's banking regulator is drafting a plan requiring banks to maintain loan-loss reserves equivalent to 2.5 percent of total lending, according to Guosen Securities Co. The regulation may go into effect next year, Qiu Zhicheng, an analyst at Guosen Securities, wrote in a note to clients on Tuesday, citing an unidentified China Banking Regulatory Commission official speaking at a financial conference hosted by the securities firm.

A gauge tracking materials producers rallied 2.3 percent to the highest level since April 26.

China's steel and cement product prices will remain sustainable at above current levels on further production cuts in the fourth quarter, Goldman Sachs Group Inc said.

Hang Seng declines

Hong Kong's Hang Seng Index fell from a one-month high as China Mobile Ltd slid after Vodafone Group Plc said it sold its stake in the phone company, and developers dropped after a media report said the nation may introduce new property market curbs.

The Hang Seng Index slid 1.46 percent to 21088.86 on Wednesday. The Hang Seng China Enterprises Index of H shares of mainland companies slipped 1.5 percent to 11776.72 on Wednesday.

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