China’s stocks rose, sending a gauge of real-estate companies to the biggest gain in a month, on speculation the government is easing property curbs to prevent the economy from missing its growth target for this year.
China Vanke Co. and Poly Real Estate Group Co. advanced more than 3 percent, with the Shanghai property sub-index climbing 2.1 percent for the biggest gain since April 22. Greentown China Holdings Ltd. and China Overseas Land & Investment Ltd. (688) jumped more than 5 percent in Hong Kong.
The Shanghai Composite Index rose 0.7 percent to 2,034.57 at the close, while Hong Kong’s Hang Seng Index advanced 0.1 percent to 22,965.86. China has allowed cities to adjust home-buying curbs except for Beijing, Shanghai, Guangzhou and Shenzhen, the Southern Weekly reported yesterday, citing several unidentified people from the housing ministry. The China Securities Journal said today the government will remove restrictions on home purchases depending on market conditions.
“Although some fine-tuning policies have already been introduced by various cities, this would be the first time the market could expect a significant relaxation of the home purchase restrictions,” Toni Ho, an analyst at Bocom International Holdings Co., wrote in a report today.
The Hang Seng China Enterprises Index (HSCEI) gained 0.1 percent today, while the CSI 300 Index climbed 0.8 percent as software producers led a rally for technology shares. For the week, the Hang Seng Index jumped 1.1 percent, while the Shanghai gauge added 0.4 percent.
After four years of government restrictions to cool the housing market, sliding home sales and property construction have become a drag on the economy, which recorded its slowest growth in six quarters in the first three months of the year.
Industrial-output and investment growth unexpectedly decelerated last month, while new building construction fell 22 percent in the first four months of the year. New-home prices rose in April in the fewest cities in a year and a half as developers offered discounts.
UBS AG and Bocom International Holdings Co. said this month that a weaker property market poses the biggest risk to stocks. UBS has estimated the real-estate industry accounts for more than a quarter of final demand in the economy when including property-generated needs for goods such as electric machinery and instruments, chemicals and metals.
China Vanke gained 3.3 percent in Shenzhen while Poly Real Estate advanced 4.3 percent in Shanghai. China Overseas Land jumped 5.5 percent in Hong Kong. Sunac China Holdings Ltd., a homebuilder partly owned by buyout firm Bain Capital LLC, surged 8.2 percent in Hong Kong after agreeing to pay HK$6.3 billion ($812 million) for a 24.3 percent stake in Greentown. Greentown surged 6.6 percent.
The Ministry of Housing and Urban-Rural Development has allowed most Chinese cities to independently adjust curbs, the Southern Weekly reported. Two phone calls to the news department of the housing ministry went unanswered. Hangzhou, a city near Shanghai will limit home price cuts, the Qianjiang Evening News reported, citing an unidentified person with a developer.
The biggest homebuilding slump in at least four years isn’t enough to dissuade a majority of economists from predicting real estate will still contribute to 2014 growth. Property controls will be eased, they said in a Bloomberg survey.
While 12 of 18 economists say China has some national oversupply of housing, only seven say the market is in a bubble state countrywide, according to the survey conducted from May 15 to May 20. Half see bubbles in some cities, and a majority says the loosening of restrictions on home purchases and loans will be limited to a regional level.
Central bank Governor Zhou Xiaochuan said China may have housing bubbles in some cities, an issue that’s difficult to resolve with a single nationwide policy. The economy “can still manage something around a 7.5 percent growth rate,” Zhou said in an interview in Rwanda yesterday, referring to the nation’s expansion target for 2014.
BYD Co. (1211), the Chinese automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc., slid 1.8 percent before shares were suspended from trading. The company is offering to sell $400 million in new stock, according to a term sheet obtained by Bloomberg News.
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