China Property Shares Drag CSI 300 Down Most in 2 Years on Curbs
China’s stocks plunged, dragging down the CSI 300 (SHSZ300) Index by the most in two years, after the government ordered more measures to cool property prices and growth in the nation’s services industries slowed.
The CSI 300, representing the nation’s biggest companies in the Shanghai and Shenzhen stock exchanges, fell 4.6 percent to 2,545.72 at the close, the most since November 2010, while the Shanghai Composite Index (SHCOMP) slid 3.7 percent to 2,273.40, the most since August 2011. China Vanke Co., the nation’s largest property developer, led a gauge of real-estate companies to the steepest tumble since June 2008. Anhui Conch Cement Co. and Sany Heavy Industry Co. dropped by more than 8 percent.
China’s cabinet on March 1 told cities with “excessively fast” price gains to raise down-payment requirements and interest rates on second-home mortgages and ordered individuals selling properties to “strictly” pay a 20 percent tax on the sale profit when the original purchase price is available, a levy that is being easily avoided.
“When there are new rules like these, it extends far beyond property shares,” Zhang Yanbin, an analyst with Zheshang Securities Co. in Shanghai, said by phone today. “There have been talks of property measures in the past few weeks, leading to declines in the market. The news over the weekend was evidence of a detailed measure, hence the loss is much bigger.”
The Shanghai index’s losses pared gains for the year to 0.2 percent and trades for 9.4 times projected 12-month earnings, the lowest since December. The benchmark measure had rallied as much as 24 percent from an almost three-year low on Dec. 3 on speculation the nation’s economic growth would rebound from the slowest pace since 1999.
A purchasing managers’ index released yesterday showed the nation’s services industries expanded at the slowest pace in five months. A government manufacturing PMI gauge released last week missed estimates. Chinese legislators begin an annual conference tomorrow, during which the government usually announces economic targets for the year.
The Hang Seng China Enterprises Index (HSCEI) lost 2.4 percent. Shanghai Composite trading volumes were 25 percent higher than the 30-day average as 50-day volatility climbed to 22.09, the highest level in more than a year, according to data compiled by Bloomberg.
A gauge of developers in the Shanghai Composite Index tumbled 9.3 percent, the most since June 2008. Vanke, the nation’s largest publicly traded developer, tumbled 10 percent to 10.84 yuan. Gemdale Corp. sank 10 percent to 6.42 yuan, the biggest loss since Aug. 31, 2009. Poly Real Estate Group Co. also slumped 10 percent to 11.37 yuan.
The People’s Bank of China’s regional branches may implement the measures in accordance with the price-control targets of local governments, the State Council said in a statement on its website on March 1. Cities facing “relatively large” pressure from rising house prices must further tighten home-purchase limits, according to the statement.
“The new measures would immediately affect buyers’ sentiment and hence sales volumes,” UBS AG analysts including Eva Lee wrote in a report today. “The new measures will ’freeze’ the entire market and delay the originally planned sales schedules planned for the near term.”
China Minsheng Banking Corp. retreated 6.8 percent to 9.49 yuan, while Industrial Bank Co. (601166) dropped 9 percent to 18.34 yuan amid concern home lending will slow. Anhui Conch, the biggest cement producer, lost 10 percent to 17.88 yuan on speculation fewer home purchases will damp demand for building materials. Sany Heavy Industry declined 8.6 percent to 10.77 yuan.
“Property is very wide-reaching,” Zheshang Securities’ Zhang said. Real-estate curbs “impact other sectors like banks and cement companies, so you see a huge drag on the market today.”
Citic Securities Co., the largest listed brokerage, lost 6.5 percent to 13.81 yuan. Haitong Securities Co., the second biggest, sank 6.4 percent to 11.86 yuan, the most since Aug. 13.
The China Securities Regulatory Commission is likely to consider resuming IPOs after completing fiscal checks on companies pending listing, the Securities Times reported today, citing the regulator’s vice chairman Zhuang Xinyi. Zhuang didn’t disclose a timetable for resuming IPOs, the newspaper said.
The non-manufacturing Purchasing Managers’ Index fell to 54.5 in February from 56.2 in January, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement yesterday. The index’s reading has been above 50, which indicates expansion, for at least two years.
Pressure on China to tighten monetary policy is easing as inflation will be “relatively low” this month due to slowing food-price gains, People’s Bank of China adviser Song Guoqing said.
Premier Wen Jiabao will outline economic policies at the start of the National People’s Congress in Beijing as the government grapples with sustaining a recovery from the slowest growth in 13 years without triggering a resurgence in consumer and asset-price inflation. While the government has pledged to boost incomes and consumption, last week’s decision to intensify a three-year crackdown on the property market may damp the nation’s rebound.
“There will be a lot of fluctuations ahead of the meetings as investors await measures announced by the government,” Zhou Lin, an analyst at Huatai Securities Co., said by phone from Nanjing. “There’s definitely concern about the economy’s recovery after the weak services PMI.”
The Bloomberg China-US 55 Index (CH55BN) added 0.1 percent in New York on March 1. The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., declined 0.9 percent to $38.60 for a weekly gain of 0.2 percent.
Ambow Education Holding Ltd. tumbled 31 percent to $1.13 last week. The company was sued by investors who accuse it of orchestrating a “fake acquisition” to facilitate an initial public offering in the U.S.
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