China’s Stocks Slump as Developers Tumble Most Since June 2008Weiyi Lim
China’s stocks fell, led by the biggest slump among developers since 2008, after the Cabinet called for more measures to cool property prices and after growth in the nation’s services industries slowed.
The Shanghai Composite Index slid 2.6 percent, the most since Feb. 21, to 2,298.36 as of 10:31 a.m. local time. The CSI 300 Index lost 3.6 percent to 2,574.10. China Vanke Co. led a gauge of developers to the biggest tumble since June 2008 after the State Council called for higher down-payments and interest rates for second-home mortgages. China Minsheng Banking Corp. sank 4.8 percent, pacing declines among lenders.
“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.”
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 lost 2 percent. The Bloomberg China-US 55 Index added 0.1 percent in New York on March 1.
Shanghai Composite trading volumes were 53 percent higher than the 30-day average for this time of day, according to data compiled by Bloomberg. The gauge added 2 percent last week, taking its gain since Dec. 3 to 20 percent. The index trades for 9.6 times projected 12-month earnings, near the lowest since Dec. 24.
A gauge of developers in the Shanghai Composite Index tumbled 8.8 percent, the most since June 19, 2008. Vanke, the nation’s largest publicly traded developer, tumbled 9.1 percent to 10.95 yuan. Gemdale Corp. sank 10 percent to 6.42 yuan, poised for the biggest loss since Aug. 31, 2009. Poly Real Estate Group Co. sank 10 percent to 11.37 yuan.
China called for higher down-payments and interest rates for second-home mortgages in cities with “excessively fast” price gains and ordered stricter enforcement of taxes on sales as authorities step up a three-year campaign to cool the property market.
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, or Cabinet, 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.
China Minsheng Banking retreated 4.8 percent to 9.69 yuan, while Industrial Bank Co. dropped 4.6 percent to 19.23 yuan amid concern home lending will slow. Anhui Conch Cement Co. lost 8.9 percent to 18.11 yuan on speculation fewer home purchases will damp demand for building materials.
“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.”
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 iShares FTSE China 25 Index Fund, 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.