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China Stocks Rise as Property Gauge Rallies Most in Eight Weeks

July 18 (Bloomberg) –- Bloomberg’s Stephen Engle reports on home prices falling in 55 of the 70 cities monitored by the Chinese government and what it means for the economy. He speaks to Rishaad Salamat on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

China’s stocks rose, sending a gauge of real-estate companies to its biggest gain in about two months, amid speculation more cities will loosen property curbs as home prices slump.

China Vanke Co. (000002) and Poly Real Estate Group Co., the largest Chinese developers, surged more than 3 percent, while a sub-index of property shares jumped 2.1 percent. Kweichow Moutai Co., the biggest liquor maker, soared 4.7 percent, capping a 13 percent rally this week. Huadian Power International Corp. dragged down electricity producers with a 1.3 percent loss.

The Shanghai Composite Index (SHCOMP) rose 0.2 percent to 2,059.07 at the close, extending this week’s gains to 0.6 percent. Pressure is building on the government to remove restrictions on home purchases after data today showed prices fell in a record number of cities last month. China’s housing minister urged cities with large housing inventories to cut it “with all means,” the 21st Century Business Herald reported.

There are reports “about the loosening of property policies and it’s likely to continue,” said Zhang Haidong, analyst at Tebon Securities Co. in Shanghai. “With falling home prices, we expect various cities to release loosening measures. Investors expect the property sector to stabilize in the fourth quarter and pull the economy along.”

The CSI 300 Index rose 0.3 percent, led by consumer staples. The Hang Seng China Enterprises Index (HSCEI) slid 0.6 percent after a Malaysian Airline System Bhd passenger jet was shot down over Ukraine. The Bloomberg China-US Equity Index dropped 1.5 percent yesterday.

“The MAS incident will cause some jitters to the market, but it’s going to only have a fleeting impact,” said Zhou Lin, an analyst at Huatai Securities Co. “After all, it’s a Malaysia airline, not very major in the overall global stage so the impact will be temporary. There will be investors who are risk averse after this.”

Home Prices

The measure of property shares in the Shanghai index climbed the most since May 23. Poly Real Estate gained 4.1 percent, while China Vanke added 3.3 percent.

Prices fell in 55 of the 70 cities last month from May, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the statistics. Prices in Shanghai and the southern city of Guangzhou fell 0.6 percent each from May, the biggest drop since January 2011.

Housing Minister Chen Zhenggao urged cities with high housing inventories to reduce them, 21st Century Business Herald reported, citing an unidentified local housing official who participated in a meeting that Chen held. Local authorities could set policies to stabilize their property markets based on local conditions, according to the paper. Hohhot and Jinan became the first among about 40 Chinese cities to ease home-purchase restrictions.

Consumer Staples

A measure of consumer-staples producers in the CSI 300 climbed 2 percent, the biggest gain among 10 industry groups. Kweichow Moutai surged to the highest level since August 2013. Wuliangye Yibin Co., the second-largest maker of baijiu liquor, jumped 3.1 percent.

A sub-index of utilities fell 1 percent for the steepest decline among industry groups. Huadian Power lost 1.3 percent, paring a rally over the past month to 24 percent. China Yangtze Power Co. (600900), owner of the world’s biggest hydropower project, dropped 0.8 percent.

The Shanghai property sub-index trades at 5.7 times projected 12-month earnings, compared with 7.6 times for the Shanghai Composite. Trading volumes on the broader index were 14 percent above the 30-day average today.

Shanghai Beite Metal Works Co., an auto-parts maker, climbed 44 percent in its mainland debut. Shanghai Beite and 11 more companies that will begin marketing their shares next week may freeze subscription funds of as much as 766.5 billion yuan ($124 billion), according to the Securities Daily.

To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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

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