China’s Stocks Fall to 2009 Low on Property Curbs, IMF Comments

Chinese stocks fell to their lowest level since 2009 as the International Monetary Fund said the country’s economy faces significant downside risks and investors speculated the government won’t loosen property curbs.

A gauge of real estate companies slumped 1.9 percent, led by Poly Real Estate Group Co. (600048), as the government said it will send teams across the nation to check that housing curbs are being implemented and the China Securities Journal said transaction charges on the sales of homes may increase. Kweichow Moutai Co. (600519), China’s biggest producer of baijiu liquor by market value, paced gains by consumer-staples producers on earnings optimism.

“Property stocks are facing increasing policy risks,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “If there are new measures to curb the property market, that’ll limit room for macro policy easing.”

The Shanghai Composite Index (SHCOMP) retreated 0.5 percent to 2,136.15 at the close, its lowest level since March 2009. The CSI 300 Index (SHSZ300) slipped 0.7 percent to 2,360.08. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, climbed 0.4 percent in New York yesterday.

China’s slowing economy relies too much on investment, directors of the IMF executive board said in a statement released today, urging leaders to boost consumption and channel citizens’ savings away from housing.

2009 Low

Achieving a so-called “soft landing” is a key challenge, the IMF said. It repeated an assessment that the yuan is “moderately” undervalued, which China disputed.

The Shanghai Composite has fallen 13 percent from this year’s high on March 2 to trade near its lowest level since March 2009 amid concern the economic slowdown is deepening. The gauge is valued at 9.5 times estimated profit, compared with the average of 17.5 since Bloomberg began compiling the data in 2006.

The MSCI Asia Pacific Index (MXAP) dropped 1 percent today as Greece’s creditors met to assess how far the debt-stricken nation has strayed from bailout terms and after Apple Inc.’s profit and sales missed analysts’ estimate.

Thirty-day volatility in the Shanghai index was at 14.4 today, compared with this year’s average of 17.9. About 5.5 billion shares changed hands in the gauge yesterday, 34 percent lower than the daily average this year.

China Vanke Co., the nation’s biggest listed property developer, lost 2.5 percent to 9.10 yuan. Poly Real Estate, the second largest, fell 2.5 percent to 11.15 yuan. China Merchants Property Development Co. (000024), the third biggest, slid 2.5 percent to 23 yuan.

Property Curbs

The State Council will send eight teams to 16 provinces including Beijing and Shanghai from late July to check the implementation of property curbs, according to a statement posted to the central government website yesterday.

The nationwide check aims to “firmly” restrain property speculation and consolidate the result of property curbs, it said. The groups will also check the implementation of home- buying restriction policies, credit and tax policies and the supply of land, according to the statement.

In addition to higher transaction taxes, the government may also impose a property tax on vacant homes, the China Securities Journal reported today, it said, citing an unidentified person.

A measure of consumer-staples stocks rose 0.1 percent on the CSI 300, the only one of 10 industry groups to gain, and extending this year’s advance to 9.9 percent.

Kweichow Moutai climbed 2.5 percent to 255.55 yuan toward a record-high. Jiangsu Yanghe Brewery Joint-Stock Co. (002304) added 0.9 percent to 146.44 yuan. JiuGuiJiu Co. rallied 3.8 percent to 53.11 yuan.

Earnings Reports

Major liquor makers including Kweichow Moutai and Wuliangye Yibin Co. may report between 40 percent and 60 percent increases in first-half profit, Qi Ying, an analyst at Haitong Securities Co., wrote in a report yesterday.

Chinese publicly traded companies are required to release first-half earnings results in July and August. Of the 885 companies in the Shanghai Composite, the 22 that reported second-quarter earnings had an average 5.5 percent profit decline, according to data compiled by Bloomberg. Profit rose 2.8 percent in the first quarter, the data showed.

Great Wall Motor Co. (601633), China’s biggest pickup truck maker, rose 2 percent to 16.05 yuan. First-half net income rose 30 percent from a year earlier, the company said in a statement yesterday.

Citic Securities Co. raised Great Wall Motor’s earnings estimate for this year by 9 percent, citing strong sales of sports-utility vehicles, Li Chunbo, an analyst at the brokerage, wrote in a report today.

--Zhang Shidong. Editors: Richard Frost, Chan Tien Hin

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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