China Stocks Drop Most in Five Weeks on Property ConcernsWeiyi Lim
China’s stocks fell the most in five weeks after valuations for the benchmark index climbed to the highest level in 17 months and on concern the government may introduce measures to curb property prices in March.
China Vanke Co. and Poly Real Estate Group Co. slumped more than 4 percent, sending a gauge of developers to its biggest loss in six months after China Business News said the government may impose real-estate curbs around the time of an annual legislative meeting. Anhui Conch Cement Co. slid the most since September 2011 after the government forecast slowing cement output growth. SAIC Motor Corp. dropped 4.5 percent, leading losses for consumer companies reliant on economic growth.
The Shanghai Composite Index fell 1.6 percent to 2,382.91 at the close, the biggest loss since Jan. 11 and the worst two-day start to the Lunar New Year since 2007. The CSI 300 Index retreated 1.9 percent to 2,685.61. The Hang Seng China Enterprises Index slumped 1.4 percent.
“There’s been speculation that there will be more property tightening as home prices have not fallen,” Zhang Lei, an analyst with Minsheng Securities Co., said by phone from Beijing. “This talk is still making the rounds and there are expectations more measures will be announced. Stocks are also down after rallying a lot.”
The Shanghai index has risen 22 percent from a three-year low on Dec. 3 on signs economic growth is accelerating. The gauge traded at 13.4 times reported profit yesterday, the highest level since September 2011, data compiled by Bloomberg show. It’s now valued at 13.2 times.
The Shanghai index’s 14-day relative strength index was at 69 yesterday. Some analysts see a reading of more than 70 for the RSI, which measures how rapidly prices have advanced or declined during the specified time period, as a signal to sell. Trading volumes were 6.7 percent lower than the 30-day average today, according to data compiled by Bloomberg.
A gauge of property stocks in the Shanghai index slid 4.6 percent, the most among five industry groups. China Vanke, the nation’s biggest developer, slumped 4.3 percent to 11.20 yuan. Poly Real Estate, the second largest, declined 5.1 percent to 12.22 yuan.
China may introduce more policies to curb property prices before or after the National People’s Congress annual session next month, China Business News reported, citing Xie Yifeng, head of the Asia-Pacific City Development Research Center’s real estate institute.
“There’s expectation of more tightening measures as property prices in some cities are still rising,” said Zhu Jixiang, an analyst at CSC International in Shanghai. In an effort to tighten the property market, the government has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, and enacted home-purchase restrictions in about 40 cities.
In a report on Feb. 6, the central bank signaled inflation and the housing market remain concerns and said it will maintain a prudent monetary policy. One-year interest-rate swaps rose the most in four weeks today after the central bank drained funds from the financial system for the first time in eight months.
Anhui Conch slid 7.6 percent to 19.72 yuan. Huaxin Cement Co. fell 7.2 percent to 16.27 yuan. The Ministry of Industry and Information Technology forecast cement output growth of less than 5 percent this year, compared with 2012’s 7.4 percent gain.
China’s stocks dropped yesterday on concern growth in retail sales slowed during the Lunar holiday. Sales at shops and restaurants monitored by the Ministry of Commerce increased 14.7 percent in the Feb. 9 to Feb. 15 holiday period from the year-earlier break. That was down from a 16.2 percent pace in 2012.
“The economy is recovering, but we are unsure if it’s going to be a strong rebound or a weak improvement,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “This can be seen from the declines in property and auto stocks.”
SAIC Motor, the biggest Chinese automaker, paced declines for consumer-discretionary companies, falling 4.5 percent to 17.86 yuan. BYD Co. slid 3.8 percent to 26.15 yuan, after jumping 6.8 percent yesterday. Gree Electric Appliances Inc. slumped 2.5 percent to 28.52 yuan.
-- Editors: Allen Wan, Chan Tien Hin