China Developers’ Shares Slump in Hong Kong on Dim Housing Sales Outlook

Evergrande Real Estate Group Ltd. (3333), China’s second-biggest developer by sales, led declines among the nation’s builders in Hong Kong trading on concerns their sales will weaken this year.

Evergrande tumbled 17 percent to HK$2.44 at the close of trading, the biggest drop since the shares debuted in 2009. Agile Property Holdings Ltd. (3383) fell 14 percent to HK$5.15, the lowest since April 28, 2009. Six of the 10 biggest declines on the MSCI China (MXCN) Index were by property companies.

“The traditional peak property sales season in September failed to show strong records,” said Danny Bao, a Hong Kong- based analyst at Daiwa Securities Capital Markets. “That worried investors. Some long-term investors are even selling off.”

Property transactions in September dropped 13 percent from August, according to SouFun Holdings Ltd., China’s biggest real estate website that tracks 20 cities. Chinese developers face an “increasingly severe” credit outlook, which may force them to cut prices and turn to costlier funding sources as sales weaken, Standard & Poor’s said on Sept. 27.

Greentown China Holdings Ltd. (3900), the biggest builder in the eastern Zhejiang province, decreased 5.1 percent to HK$3.70, the lowest since April 1, 2009. Renhe Commercial Holdings Co., a developer of underground commercial centers, plunged 12 percent.

The hope of “Golden September” for property developers turned out to be false, and the weak sales in the traditional peak season should disappoint the market, Citigroup Inc. analysts led by Oscar Choi said in a report dated Sept. 29.

Home sales in Beijing fell 10 percent in the first three quarters from a year ago, while in Shanghai they dropped 5 percent, according to SouFun.

The government said in July that it will rein in residential prices in smaller cities after it raised down- payment requirements and mortgage rates earlier this year. China also increased major lenders’ reserve-requirement ratios by 0.5 percentage point to a record 21.5 percent starting June 20 and raised interest rates five times since September.

--Bonnie Cao. Editors: Andreea Papuc, Linus Chua

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at +86-21-6104-3035 or bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net