China Stocks Fall as Property Curbs Overshadow Industrial Profit

Updated on
  • Shanghai, Shenzhen take measures to tame soaring home prices
  • Industrial companies' profits halt seven-month losing streak

China’s stocks fell as property developers slumped after some of the nation’s biggest cities introduced real-estate curbs, overshadowing a rebound for industrial companies’ profits.

The Shanghai Composite Index slipped 0.7 percent, erasing a gain of as much as 1 percent. Poly Real Estate Group Co. and Gemdale Corp. led declines for developers. Shenzhen joined Shanghai in introducing measures late last week to tame soaring real-estate prices, including increasing down-payment requirements. Industrial profits broke a seven-month losing run to climb 4.8 percent in the January-February period.

Property prices in the largest Chinese cities have begun to diverge severely from values in less-populated areas, spurring People’s Bank of China Governor Zhou Xiaochuan to warn lenders this month about increased credit risk from this trend. Shenzhen will also limit local residents to purchases of two homes, while Shanghai will tighten approval criteria for non-resident homebuyers and ban unregulated lending.

“Developers are facing some headwinds as these measures are likely to cause 
immediate negative impact on the demand side,” said Wu Kan, a fund manager at JK Life Insurance in Shanghai. “The market is in the stage of building a bottom so we’ll see lots of ups and downs.”  

The Shanghai Composite closed below the 3,000 level for a third day at 2,957.82, with trading volumes 6.8 percent below the 30-day average. The CSI 300 Index retreated 0.9 percent, led by financial and consumer-discretionary shares. Hong Kong’s markets were shut on Monday and will re-open on Tuesday.

The Shanghai index has rebounded 11 percent from a January low as regulators loosened curbs on margin trading and investors speculated the government was propping up equities during this month’s National People’s Congress.

The city’s property index dropped 1.8 percent for the biggest loss among industry groups. Poly Real Estate Group Co. slid 2.5 percent, while China Merchants Shekou Industrial Zone Co. dropped 2.8 percent. Greenland Holdings Corp. fell 3 percent.

Shanghai, where new home prices soared 21 percent in February from a year earlier, last week became the first large city to tighten residence-buying requirements. Shenzhen, where new-home prices have jumped 57 percent from a year earlier, also issued new measures to stabilize the city’s housing market, including a down payment requirement at 40 percent for some buyers.

Consumer-staples producers advanced, led by a 3.1 percent rally for Wuliangye Yibin Co. after the liquor maker reported a 6 percent gain in annual net income. Henan Shuanghui Investment & Development Co., China’s biggest listed pork processor, added 2.6 percent.

Oil processing, electrical machinery and food companies led gains as 28 of 41 industry groups posted profits, data from the National Bureau of Statistics showed. Profits fell 2.3 percent in 2015, the data showed.

— With assistance by Shidong Zhang

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