China’s stocks fell for the ninth time in 10 days, dragged down by property developers and material producers, after Beijing tightened rules for real estate projects to contain a rebound in home prices.
China Vanke Co., the nation’s biggest developer, slumped 3.4 percent on speculation stricter property curbs will hurt earnings. Anhui Conch Cement Co., the largest producer of the building material, declined to a nine-month low. Tasly Pharmaceutical Group Co., a traditional medicine company, led drugmakers to the biggest gain among industry groups.
The Shanghai Composite Index (SHCOMP) slipped 0.3 percent to 2,156.22 at the close, with trading volumes 24 percent lower than the 30-day average. The index fell last week after reports showed industrial production and exports trailed estimates and higher money-market rates stoked concern about tighter liquidity. The CSI 300 Index dropped 0.5 percent to 2,403.84. The Hang Seng China Enterprises Index (HSCEI) gained 1.1 percent, snapping 12 days of losses.
“Investors are still digesting news about bad economic data and tight liquidity,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “The lack of flows in the market may persist until early July. People are avoiding companies such as property developers because of the economic concern. We may see occasional technical rebounds, but any gains will be temporary.”
The Shanghai measure has fallen 11 percent from this year’s high on Feb. 6. The index trades at 8.9 times 12-month estimated earnings, compared with the three-year average of 10.8, data compiled by Bloomberg showed. Its 30-day volatility was at 15.9, compared with this year’s average of 19.1, the data showed.
The government may release foreign investment data as early as today, while May housing prices are scheduled for tomorrow. China’s home prices rose 10.7 percent in the first quarter of 2013 from the previous three months, the biggest gain among 55 global real-estate markets, according to Knight Frank.
A gauge of property stocks in the Shanghai index declined 0.7 percent, the most among five industry groups. China Vanke dropped 3.4 percent to 10.33 yuan. Poly Real Estate, the second-biggest developer, fell 0.9 percent to 10.97 yuan, while Gemdale Corp. lost 1.9 percent to 6.64 yuan.
Anhui Conch paced declines for material producers, dropping 1.8 percent to 14.20 yuan. Jiangxi Copper Co., the biggest Chinese copper producer, slid 1.8 percent to 18.93 yuan.
Beijing will require non-residential projects and residential developments bigger than an average 140 square meters (1,506 square feet) to meet requirements on construction progress before applying for presale permits, the local housing bureau said June 14. China requires developers to obtain presale permits from local housing authorities before they can sell apartments under construction.
“Beijing’s new pre-sales measures imply housing policies may become more localized,” Credit Suisse Group AG analyst Jinsong Du wrote in a note dated yesterday. “Although this new measure should not have near term impact on Beijing’s housing supply, some may view it as a sign of further tightening measures to come.”
A gauge of drugmakers in the CSI 300 rose 1.9 percent, the most among 10 industry groups. Yunnan Baiyao Group Co. surged 5.1 percent to 88.20 yuan. Tasly climbed 2.5 percent to 41.31 yuan. Tasly is optimistic over the next few years about its product Tasly Danshen Plus Capsule, which recorded 2 billion yuan in sales in 2012, Fortune CLSA Securities Ltd. wrote in a report dated today, citing meetings with company officials.
“In China specifically, we like health-care names because of the reforms the government is putting in place,” Catherine Yeung, director at Fidelity Investment Management Ltd., said in a Bloomberg TV interview in Singapore today. “Over the weekend the State Council came up with 10 measures with regards to improving air quality.”
China’s cabinet adopted a 10-point plan to tackle pollution on June 14. The efforts include increasing levies on the discharge of pollutants, controlling high energy-consuming and polluting industries and improving control of airborne particles measuring less than 2.5 microns in size, known as PM2.5.
The package “is the first milestone in the country’s anti-pollution campaign which could last for 18 years,” Ma Jun, Deutsche Bank’s chief economist for Greater China in Hong Kong, wrote in a note. “In the next few years, dozens of more specific policy measures will be needed.” Those may involve limits on coal consumption for key regions and increased subsidies for shale gas, wind and solar, he said.
China may introduce policies on solar power subsidies as early as June, the China Securities Journal reported today, citing unidentified people. Hareon Solar Technology Co. surged 2 percent to 6.71 yuan.
Options traders are paying the most in two months to protect against drops in the largest Chinese exchange-traded fund in the U.S. on concern a local money-market cash crunch will deepen a slump in Asia’s biggest economy.
The cost of three-month puts on the iShares FTSE China 25 Index Fund (FXI) soared to the highest since September last week, option data compiled by Bloomberg showed. The 4.3-point premium of puts over calls was the widest since April 17. The Bloomberg China-US Equity Index slumped the most in four months last week, led by a 16 percent drop in Yanzhou Coal Mining Co.
The World Bank, Morgan Stanley and UBS AG all cut 2013 gross domestic product estimates for China last week. China can manage to see a rebound in growth if the government conducts necessary reforms including opening up some areas to private investors ranging from high-speed railways to water supply, Li Daokui, a former academic adviser to the People’s Bank of China, said at a forum in Beijing on June 15.
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