China’s Stocks Fall Most in 14 Months on Property Concern

China’s stocks fell, sending the benchmark index to its biggest loss since November 2011, on speculation more restrictions on the property industry will hurt demand for bank loans and construction materials.

A gauge of Shanghai developers slid 2.1 percent, poised for the biggest weekly drop since July, after the government told local authorities to halt real-estate speculation using measures such as home-price control targets and the expansion of a property tax. Anhui Conch Cement Co. slumped 5.4 percent. China Construction Bank Corp., the largest mortgage lender, lost 2.9 percent. Jiangxi Copper Co. and PetroChina Co. led declines for metal and energy stocks after minutes from the Federal Reserve’s last meeting showed debate over further stimulus action.

The Shanghai Composite Index retreated 3 percent to 2,325.95 at the close. The CSI 300 tumbled 3.4 percent to 2,610.55, the most since August 2011. The Hang Seng China Enterprises Index in Hong Kong slumped 3.2 percent. The Bloomberg China-US Equity Index slipped 1.1 percent yesterday.

“There are expectations of more details on property measures today or tomorrow,” Huang Cendong, an analyst at Tebon Securities Co., said by phone today from Shanghai. “If the property curbs extend to second- and third-tier cities, economic growth may be impacted.”

The Shanghai index has fallen about 5 percent after gaining as much as 24 percent during a bull-market rally that started on Dec. 3. The measure’s valuation of 9.68 times projected 12-month earnings was the lowest in a month. Trading volumes were 9 percent above the 30-day average today.

Home Purchases

The Shanghai measure has lost 4.4 percent this week, heading for the biggest drop since Sept. 12, amid concerns about tighter liquidity. China’s one-year interest-rate swaps climbed to the highest level in two weeks. The central bank drained 910 billion yuan ($146 billion) from the financial system this week, according to Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong. That was the biggest withdrawal since Bloomberg started compiling the data in 2008.

Chinese cities that have had “excessively fast” price gains should promptly impose home-purchase restrictions if they’ve not done so already, according to a statement released yesterday after a State Council meeting headed by Premier Wen Jiabao. Provincial capitals and municipalities reporting directly to the central government should also publish annual price-control targets to keep new-home costs “basically stable,” according to the statement. Wen also said China will expand property-tax trials, the Xinhua News Agency said.

Property Bubble

The Shanghai property index has fallen 6 percent this week. Poly Real Estate Group Co. dropped 0.7 percent to 12.30 yuan toda, while China Vanke Co. slid 1.1 percent to 11.31 yuan.

In an almost three-year 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. Home prices rose 1 percent last month from December, the most since January 2011, according to data from SouFun Holdings Ltd., the nation’s biggest property website.

Anhui Conch, the biggest cement producer, slid 5.4 percent to 18.72 yuan. Huaxin Cement Co. declined 6 percent to 15.21 yuan. SAIC Motor Corp., the largest automaker, plunged 5 percent to 17.14 yuan.

China Construction Bank, the nation’s second-biggest lender, declined 2.9 percent to 4.67 yuan. Its mortgage loans accounted for 20 percent of the total loan portfolio at the end of June, according to earnings reports. Industrial & Commercial Bank of China Ltd., the second largest mortgage lender with a ratio about 14 percent, slumped 1.4 percent to 4.18 yuan.

Commodity Producers

Gauges of energy and material stocks in the CSI 300 fell 4.3 percent and 4 percent respectively. Jiangxi Copper, the biggest producer of the metal, retreated 5.9 percent to 24.32 yuan. PetroChina, the largest oil producer, fell 2.7 percent to 9.05 yuan. Coal producer China Shenhua Energy Co. slid 4.5 percent to 22.93 yuan.

The Standard & Poor’s GSCI Spot Index of 24 raw materials declined 1.1 percent yesterday for the biggest loss in more than two months amid speculation a hedge fund was selling and as Fed minutes showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds until there is “substantial” improvement in the U.S. labor market.

Before it's here, it's on the Bloomberg Terminal.