Chinese stocks fell for the third day this week, led by property developers, on concern the government will take more steps to cool the housing market and before European Central Bank policy makers meet.
A gauge tracking real-estate companies plunged 4.9 percent, the most since January. Poly Real Estate Group Co. and Beijing Capital Development Co. sank more than 9 percent. China Railway Construction Corp. declined 2.1 percent after agreeing to buy a 15 percent stake in Inter Milan, an Italian soccer club, according to people familiar with the talks. Baoshan Iron & Steel Co. paced gains by steelmakers on speculation the companies will buy back their shares to boost stock prices.
The Shanghai Composite Index (SHCOMP) dropped 0.6 percent to 2,111.18 at the close, as about thee stocks fell for each one that gained. The CSI 300 Index (SHSZ300) slid 1 percent to 2,344.88. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, lost 0.5 percent in New York.
“Investors are speculating the government has enough information to release new tightening policies,” said Dai Fang, a Shanghai-based property analyst at Zheshang Securities Co. “It’s hard to tell whether the government eventually will, because they still put economic growth as a priority.”
The Shanghai Composite has fallen 14 percent from this year’s high on March 2 amid concern the economic slowdown is deepening and Europe’s debt crisis is worsening. Europe is China’s largest export market, making up 18 percent of the nation’s overseas sales, according to Shenyin & Wanguo Securities Co.
Thirty-day volatility in the Shanghai Composite Index was at 14.3. About 5.4 billion shares changed hands in the gauge yesterday, 29 percent lower than the average this year. The index is valued at 9.5 times estimated profit, compared with the three-year average of 14.7.
Poly Real Estate slumped 9.2 percent to 10.30 yuan. Beijing Capital Development plunged 9.8 percent to 10.18 yuan, the most since November 2010. Gemdale Corp. (600383) tumbled 6.4 percent to 5.43 yuan.
Premier Wen Jiabao said the country will “unswervingly” implement property controls and prevent housing prices from rebounding, the official Xinhua News Agency reported this week, citing a government meeting held on July 26. The country’s home prices posted the biggest gain in more than a year last month, signaling a turning point for the nation’s property market, SouFun Holdings Ltd., the country’s biggest real estate website owner, said yesterday.
China sent eight teams to 16 provinces late in July to check on the implementation of its property curbs, according to a statement on the central government website last week.
China Railway Construction lost 2.1 percent to 4.72 yuan. The transaction would include debt from the 18-time Italian champion, said the people, who declined to be identified because the negotiations are private. Hong Kong-based QSL Sports Ltd. will also be part of China Railway’s investment group, the people said.
Investors are looking for the European Central Bank President Mario Draghi to make good on his promise to do whatever is needed to protect the euro, interpreted by most as a signal that the ECB will intervene in bond markets. Should Draghi fail to overcome the objections of Germany’s Bundesbank to such action, the disappointment could spark a selloff. He holds a press conference at 2:30 p.m. in Frankfurt.
The ECB officials will keep the benchmark interest rate at a record low 0.75 percent, according to 51 of 55 economists in a Bloomberg News survey. The decision will be announced at 1:45 p.m. in Frankfurt.
The Bank of England will also hold its key rate at 0.5 percent and maintain its bond-purchase target at 375 billion pounds ($586 billion), surveys of economists show. That decision is due at noon in London. Two unexpected rate-cut decisions by the Chinese central bank on July 5 and June 7 coincided almost exactly with the release of the BOE’s policy statement.
Baoshan Steel, the listed unit of China’s second-biggest steelmaker, rose 1.2 percent to 4.25 yuan. Angang Steel Co. jumped 1.6 percent to 3.75 yuan in Shenzhen, the biggest advance since April 12.
Chinese publicly traded companies, especially those whose stock prices are below their book values, have an obligation to buy back their own shares, the China Securities Journal reported today, citing an unidentified official at the China Securities Regulatory Commission. Baoshan Steel’s per-share book value was 6.15 yuan while Angang’s was 7.01 yuan, according to data compiled by Bloomberg.
Baoshan Steel Vice President Chen Ying and Fu Jihui, board secretary of Angang Steel, couldn’t be reached for comment. China’s Shanghai and Shenzhen stock exchanges have 111 companies whose stock prices are lower than book values, with 17 being steelmakers, according to data compiled by Bloomberg.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 0.3 percent to $34.30, the highest level since June 19.
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