China Stocks Fall Most in Week, Led by Property, Small Companies

China’s stocks fell the most in almost a week, led by developers, as surging home prices spurred speculation the government may tighten property curbs. Smaller companies tumbled on concern valuations are excessive.

Poly Real Estate Group Co. (600048) and Gemdale Corp. (600383) paced declines for property companies. Software maker Neusoft Corp. slid 7 percent and a measure of technology shares dropped the most among 10 industry groups after valuations jumped to the highest since January 2011. The ChiNext index of small companies tumbled 3.6 percent. Developer Tianjin Songjiang Co. rallied 10 percent after the China Securities Journal reported the city is very likely to gain approval for a free-trade zone.

The Shanghai Composite Index (SHCOMP) fell for the first time in three days, sliding 0.8 percent to 2,210.65 at the close, the bigest loss since Oct. 16. New home prices climbed in 69 of 70 cities the government tracks, according to the National Bureau of Statistics, with prices surging 16 percent in Beijing and 17 percent in Shanghai, the biggest gains since at least 2011.

“The housing price data add policy risks to the market and investors anticipate the government will probably tighten controls over the real estate industry,” said Wu Kan, a Shanghai-based money manager at Dragon Life Insurance Co., which oversees $3.3 billion.

The CSI 300 Index dropped 1 percent to 2,445.89. The Hang Seng China Enterprises Index (HSCEI) lost 0.2 percent. The Bloomberg China-US Equity Index slid 1.1 percent in New York yesterday.

Trading volumes for the Shanghai index were 2.2 percent below the 30-day average, according to data compiled by Bloomberg. The measure climbed 1.6 percent yesterday after the government called for the implementation of economic policies including increased domestic consumption.

Property Prices

A measure of property stocks in the Shanghai Composite slumped 1.5 percent. Poly Real Estate, China’s second-largest developer by market value, fell 1.7 percent to 9.59 yuan. Gemdale lost 1.7 percent to 5.87 yuan. Shanghai-based developers that have rallied on the city’s free-trade zone prospects also tumbled, with Lujiazui Finance & Trade Zone Development Co. sliding 2.8 percent to 21.64 yuan.

Existing home prices rose 18 percent in Beijing last month from a year earlier, leading the gains, followed by a 14 percent increase in Shenzhen and 12 percent in Shanghai, according to the NBS data.

Premier Li Keqiang has come up with no extra measures to rein in property prices since his predecessor Wen Jiabao stepped up a three-year campaign in March to cool the housing market, ordering the central bank to raise down-payment requirements for second mortgages in cities with excessive prices.

Trade Zone

A sub-index of technology stocks in the CSI 300 lost 2.7 percent. Software maker Neusoft sank 7 percent to 16.37 yuan after rising 4.5 percent yesterday. Hangzhou HIK-Vision Digital Technology Co. (002415) slid 5.4 percent to 25.25 yuan.

The ChiNext index slumped after jumping 3.8 percent yesterday. It has surged 89 percent this year, taking its estimated price-to-earnings ratio for this year to 44 times. Film company Huayi Brothers Media Corp. (300027) plunged 10 percent to 26.77 yuan, paring this year’s gain to 276 percent.

The Shanghai Composite trades at 8.7 times projected earnings for the next 12 months, compared with the seven-year average of 15.4, according to data compiled by Bloomberg. The index has rebounded 13 percent from its four-year low on June 27 on prospect an economic recovery will bolster earnings.

Tianjin Songjiang surged by the daily limit to 5.34 yuan. Tianjin Marine Shipping Co. jumped 10 percent to 5.91 yuan. Tianjin Port Co. (600717) climbed 10 percent to 8.94 yuan.

Tianjin Binhai New Area is “very likely” to win approval to set up a free-trade zone, the China Securities Journal reported today, citing Zong Guoying, head of the district.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.