Chinese stocks fell, dragging the benchmark index to a two-month low, as real estate and construction companies tumbled on concern policy makers will step up property curbs.
Sina.com reported the southern city of Shenzhen banned developers from raising home prices, citing discussions with property companies. Poly Real Estate Group Co. and Gemdale Corp. declined more than 3 percent. Sany Heavy Industry Co., the nation’s biggest maker of construction machinery, lost 2.1 percent. CSR Corp. and China CNR Corp., the nation’s top train makers, slumped at least 3.7 percent on concern the dismantling of the rail ministry will curb state spending.
“Property curbs and the central bank’s possible attitude towards tightening liquidity make investors nervous,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “There’s concern the economic recovery will falter.”
The Shanghai Composite Index dropped 1 percent to 2,263.97 at the close, capping a five-day, 3.6 percent losing streak that’s the longest in four months. The gauge also erased its gain for the year. The CSI 300 Index declined 1.1 percent to 2,527.49. The Hang Seng China Enterprises Index retreated 2.2 percent in Hong Kong, taking its loss from a Feb. 1 high to 9.6 percent. The Bloomberg China-US 55 Index fell 1.7 percent in New York yesterday.
The Shanghai Composite Index has lost 7 percent since this year’s high on Feb. 6 amid concern the government will tighten monetary policy at the same time as economic expansion slows. Data over the weekend showed inflation accelerated in February, while industrial output had the weakest start to a year since 2009 and lending and retail sales growth slowed.
China should be on “high alert” over inflation after February’s price gains exceeded forecasts, central bank Governor Zhou Xiaochuan said after the market closed. The nation’s monetary-policy stance is “no longer relaxed” and is “neutral”, Zhou said at a press conference during the annual gathering of the National People’s Congress.
The Shanghai Stock Exchange Property Index tumbled 2.5 percent to a three-month low. Poly Real Estate, China’s second-largest developer by market value, slid 3.8 percent to 11.14 yuan. China Vanke Co., the biggest, dropped 2.4 percent to 10.95 yuan. Gemdale lost 4.6 percent to 6.05 yuan.
Shenzhen’s land authorities won’t approve the sale of property projects with higher prices, news portal Sina.com reported, citing unidentified officials with developers including Gemdale and Vanke.
A spokeswoman at the city’s Urban Planning Land and Resources Commission, who would only identify herself as Liu, said the housing authority will issue a statement on the report today. Shenzhen adjoins Hong Kong.
The property stock gauge plunged 9.3 percent on March 4 after China’s cabinet told cities with “excessively fast” price gains to tighten home-purchase limits, through measures such as higher down-payment requirements for second mortgages and tougher regulation of a profits tax.
Sany Heavy lost 2.1 percent to 10.56 yuan. Zoomlion Heavy Industry Science and Technology Co., the second-biggest construction-machinery maker, declined 2.4 percent to 8.38 yuan, a three-month low.
The Shanghai Composite is valued at 9.3 times earnings for the next 12 months, compared with the five-year average of 13.5, according to data compiled by Bloomberg. Trading volumes in the index were 27 percent lower today than the 30-day average.
CSR, the nation’s biggest train maker, lost 3.7 percent to 4.44 yuan. China CNR, the second largest, retreated 4.8 percent to 4.33 yuan. China Railway Construction Corp., builder of more than half the nation’s rail links since 1949, tumbled 5.7 percent to 5.15 yuan, the most since July 2011.
The Ministry of Railways, burdened with 2.66 trillion yuan ($428 billion) of liabilities, will be split into two, according to government reports over the weekend. The dismantling spurred concern that investment in rail will be cut, Li Xiaolu, an analyst at Capital Securities Corp., said in Shanghai today.
Shares have also dropped amid concern regulators will resume approvals of initial public offerings, diverting liquidity from existing stocks. The China Securities Regulatory Commission suspended issuance of IPO shares in October, as investors’ appetite for new stocks waned amid equity-market declines that drove the Shanghai Composite to near four-year lows.
Separately, CSRC Chairman Guo Shuqing may be appointed as governor of Shandong province, the South China Morning Post reported today, citing people it didn’t identify. A press officer at the regulator said he hadn’t received information on the matter.
Guo, who took over as chairman in October 2011, has implemented changes such as cutting transaction costs, cracking down on insider trading and encouraging dividend payments. Under his watch, the commission also accelerated approvals for foreign investments in the nation’s capital markets through the Qualified Foreign Institutional Investors program.
— With assistance by Shidong Zhang