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China’s Stocks Decline on Housing Policy Reversal

China’s Stocks Snap Eight-Day Rally on Housing Policy
A security guard walks through China Vanke Co.'s Qinglinjing development in Shanghai, China. Photographer: Qilai Shen/Bloomberg

China’s stocks fell, dragging the benchmark index lower for the first time in nine days, on concern the government will retain measures to curb gains in housing prices this year.

China Vanke Co. led a gauge of developers down the most in three months after the China Securities Journal said Shanghai scrapped a plan allowing some non-local residents to buy second homes. PetroChina Co. slid the most in almost two weeks as crude oil traded near a one-week low. Chinese liquor maker Kweichow Moutai Co. and Wuliangye Yibin Co. advanced at least 1.3 percent on speculation earnings growth for consumer staples producers will be shielded from an economic slowdown.

The Shanghai Composite Index sank 23.37 points, or 1 percent, to 2,428.49 at the close, snapping an eight-day, 4 percent gain. The CSI 300 Index lost 1.1 percent to 2,634.14. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.7 percent yesterday.

“The property policy reversal has damped investors’ expectations that an easing of policies would put the economy back on track,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. “That will weigh on sentiment given we’ve had a good rally this year.”

The Shanghai index advanced 5.9 percent in February, capping its biggest monthly gain since October 2010, on the prospect the central bank will add to a Feb. 18 cut in reserve requirements to halt a decline in economic growth. For the year, the measure has rebounded 10 percent and trades at 10.1 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

Residence Permits

The 14-day relative strength measure for the Shanghai Composite, measuring how rapidly prices have advanced or dropped during a specified time period, was at 71.7 yesterday. Readings above 70 indicate a price may be poised to fall.

A measure tracking property stocks in the Shanghai Composite sank 3 percent today, the most since Nov. 30. It had advanced 17 percent this year through yesterday on expectations local governments will challenge Beijing’s policy of cooling housing prices.

Vanke, the biggest listed property developer, dropped 2.8 percent to 8.28 yuan. Poly Real Estate Group Co., the second largest, declined 3.3 percent to 11.10 yuan. Gemdale Corp. retreated 3.2 percent to 5.80 yuan.

Shanghai halted a plan to allow non-local residents who have held the city’s residence permits for three years to buy second homes, the China Securities Journal reported yesterday, citing local housing transaction centers. The city was loosening its definition of locals to let the residence-permit holders to make second home purchases, the Shanghai Securities News reported last week.

Crude Oil

The city’s policy reversal is negative for property stocks and it’s a clear message that the central government doesn’t want loosening to take place too fast, Alan Jin, an analyst at Mizuho Securities Asia, wrote in a note to clients.

PetroChina, the nation’s biggest oil company, fell 0.8 percent to 10.52 yuan, its biggest loss since Feb. 16. China Oilfield Services Ltd., the drilling unit of the nation’s largest offshore oil producer, lost 1.6 percent to 17.39 yuan.

Oil for April delivery in New York dropped as much as 0.3 percent to $106.20 a barrel in electronic trading today. The contract yesterday slipped 1.9 percent to $106.55, the lowest close since Feb. 22 and the biggest drop since Jan. 20.

Consumer Stocks

A measure of 23 consumer staples stocks in the CSI 300 climbed 0.5 percent, the only gain among the 10 industry groups.

Kweichow Moutai, China’s biggest producer of baijiu liquor by market value, rose 1.9 percent to 204.46 yuan. Wuliangye, the second biggest, added 1.3 percent to 35.24 yuan. Beijing Yanjing Brewery Co., the third-biggest brewer, climbed 1 percent to 15.04 yuan.

Valuations for food and beverage companies were 24 percent more expensive than the broader market as of Feb. 27, less than half of the average historical premium of 58 percent since 2005, Tong Xun, an analyst at Shenyin & Wanguo Securities Co., wrote in a report yesterday. First-quarter profits for Kweichow Moutai and Wuliangye may increase as much as 45 percent from a year earlier, according to the report.

China’s statistics bureau and logistics federation is scheduled to release a manufacturing index for this month tomorrow. The measure may rebound to 50.9, according to the median estimate of 22 economists in a survey by Bloomberg News. It was at 50.5 in January, above the 50 threshold for expansion.

In U.S. trading yesterday, the Dow Jones Industrial Average closed above 13,000 for the first time since 2008 after The Conference Board’s index of consumer confidence increased in February to the highest level in a year.

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