China’s stocks fell, extending a weekly decline by the benchmark index, as developers slumped after banks tightened mortgages amid concern the property market is overheating.
Poly Real Estate Group Co., the nation’s second-largest developer, dropped the most in almost three months. Gemdale Corp. lost 4.9 percent after saying sales fell last month. Airlines gained on speculation the government will allow the yuan to resume appreciation, cutting carriers’ overseas debts. China Southern Airlines Co., the biggest, jumped the most since July.
“We still need to be cautious on the property market,” said Shen Xiaomin, portfolio manager at Nomura Asset Management Hong Kong Ltd., in a Bloomberg Television interview in Hong Kong. “In the first-tier cities, property markets are obviously overheating.”
The Shanghai Composite Index dropped 16.08, or 0.5 percent, to 3,129.26 at the close, adding to last week’s 0.4 percent loss. The CSI 300 Index, which will be the basis for index futures trading this week, slid 0.8 percent to 3,351.48.
A gauge tracking property stocks on the Shanghai measure has slumped 10 percent this year, dragging the broader index down 4.5 percent, on concern the government’s move to unwind monetary stimulus will stifle economic growth. The central bank has twice required banks to set aside a larger proportion of deposits as reserves this year after lenders advanced a record 9.59 trillion yuan ($1.41 trillion) of new loans in 2009.
Poly Real Estate lost 4.1 percent to 18.80 yuan, the biggest loss since Jan. 26. China Vanke Co., the largest, fell 2 percent to 9.20 yuan.
Some banks in Beijing have “voluntarily and prudently” raised down-payment requirements for second mortgages to 60 percent of a property’s value, the China Banking Regulatory Commission said in a statement elaborating on comments by Chairman Liu Mingkang yesterday.
Liu’s comments “surprised the market,” David Ng, a Hong Kong-based analyst at Royal Bank of Scotland Plc, said in a report today. “The authorities seem ready to further restrict credit access to investors and speculators if needed.”
Property prices in China rose at the fastest pace in almost two years in February. Hedge fund manager James Chanos said last week that China is “on a treadmill to hell” and that the land market is a bubble that may burst as early as this year. Pan Shiyi, chairman of Soho China Ltd., said April 10 excess capital has driven rapid gains in auction prices paid for land and fueled a bubble.
Gemdale slid 4.9 percent to 12.94 yuan, the biggest decline since Jan. 26. Apartment sales fell 27 percent to 1.2 billion yuan in March from a year earlier and first-quarter sales slumped 40 percent, the company said on April 9 after the market closed.
China Southern jumped 9.2 percent to 9.13 yuan, the biggest gain since July 27, ahead of 2009 earnings scheduled for release after the market close today. The shares have advanced 51 percent this year as speculation officials will scrap the yuan’s peg to the dollar gathered pace.
“Domestic airlines are most sensitive to RMB appreciation for their massive foreign exchange borrowings, foreign exchange denominated costs and RMB revenue,” BofA-Merrill Lynch analysts led by David Cui wrote in a report dated April 9, using the abbreviation for the renminbi, the official name of the Chinese currency.
Air China Ltd., the nation’s largest international carrier, gained 5.5 percent to 14.29 yuan, capping a five-day, 17 percent climb. China Eastern Airlines Corp. advanced 4.9 percent to 9.43 yuan.
Twelve-month non-deliverable forwards traded near an 11-week high to 6.6215 per dollar as of 3:19 a.m. in Hong Kong, reflecting bets the currency will rise 3 percent from the spot rate of 6.8251, according to data compiled by Bloomberg. The contracts touched 6.6065 on April 9, the strongest since Jan. 20.
The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.
Gezhouba Co. (600068 CH), which is one of China’s largest civil engineering companies, rose 2.5 percent to 14.82 yuan after saying its 2009 profit climbed 63 percent from a year earlier to 1.3 billion yuan, according to an April 9 statement to the Shanghai stock exchange.
Nanjing Yunhai Special Metals Co. (002182 CH) climbed 3.4 percent to 16.28 yuan, the highest close since Jan. 20. The stock was rated “outperform” in initial coverage at Citic Securities Co., which said in a report today the company’s earnings will recover this year.
Sichuan Chemical Co. (000155 CH), the fertilizer manufacturer, lost 4.4 percent to 8.42 yuan after the company said it likely swung into a loss of between 30 million yuan and 35 million yuan in the first quarter, compared with a profit of 66.3 million yuan in the year-earlier period.
Wuxi Commercial Mansion Grand Orient Co. (600327 CH) jumped the 10 percent daily cap to 16.01 yuan after saying profit rose 73 percent last year to 187.3 million yuan.
Xinghui Auto Model Co. (300043 CH) added 2.5 percent to 49.99 yuan, its highest since Jan. 20. The shares were rated “buy” in initial coverage at Citic Securities Co., which said in a report today the company will benefit from rapid growth in the country’s car market.
Xiangtan Electric Manufacturing Co. (600416 CH) rose 3 percent to 25.11 yuan, the highest close since March 2008. The stock was given a “buy” rating by GF Securities Co. in new coverage. The brokerage said the company may receive an asset injection from its parent.