Developer Shares Fall After Report of Profit Cap: Shanghai Mover

China Vanke Co. (000002), Poly Real Estate Group Co. (600048) and Gemdale Corp. (600383) led shares of developers lower after the China Securities Journal reported that Shaanxi province imposed a cap on profit margins for property projects.

Vanke, the nation’s largest listed developer, fell as much as 2 percent in Shenzhen, the biggest intraday drop in two weeks. The stock was trading 1.5 percent lower at 8.29 yuan as of the 11:30 a.m. local time trading break. Poly Real Estate and Gemdale each dropped 1.1 percent in Shanghai. A gauge of developers listed in the city slid 0.5 percent as China’s benchmark Shanghai Composite Index sank 0.6 percent.

The China Securities Journal reported today that Shaanxi authorities told cities in the province to limit developers’ profit margins for residential projects to 10 percent. That followed an Oct. 19 report by the Shanghai Securities News that cited a housing ministry researcher calling for China to avoid large profits for developers and Premier Wen Jiabao saying Oct. 17 that the government must continue its property curbs.

“Other provinces may follow Shaanxi to issue a cap on profit margins of property projects,” Du Jinsong, a Hong Kong- based analyst at Credit Suisse Group AG, said by telephone. That’s fueling concern that the government will continue to impose restrictions on property, leading to the decline in developer shares, said Du, who rates Vanke “outperform.”

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net

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