Chinese Stocks Post Weekly Retreat on Regulatory Curb Concerns

  • Cities said to consider steps to cool property speculation
  • Market running into resistance as easing bets fade: Jinkuang

China’s shares capped a weekly loss, led by property companies, amid concern the government will take steps to cool speculative activity in the nation’s financial markets.

The Shanghai Composite Index fell 1.2 percent for the week, the most since the week ended July 22, and added less than 0.1 percent on Friday. A gauge of real estate companies retreated 4.6 percent in the five-day period. Local governments in Shanghai, Beijing and Tianjin are considering new measures to to rein in house prices, according to people familiar with the matter. The Hang Seng Index climbed 0.4 percent, paring a weekly decline.

Shanghai, where prices of new homes jumped 27 percent in July, is preparing to discuss a fresh round of curbs including potential restrictions on mortgages and loans to developers, the people said. Ten-year government bond yields spiked earlier this week on signs policy makers are looking to curb leverage in the debt market. Increasing bets that the Federal Reserve will raise interest rates this year are also pressuring the yuan, which weakened against the dollar. A speech by Fed Chair Janet Yellen on Friday will be closely watched.

“The market is running into resistance as easing expectations fade,” said Zhang Haidong, chief strategist at Jinkuang Investment Management in Shanghai. “Investors are waiting for Janet Yellen’s speech amid corrections in overseas markets.”

The Shanghai Composite closed at 3,070.31. The Hang Seng China Enterprises Index gained 0.5 percent, trimming its weekly decline to 0.6 percent.

Concern the government will step up measures to cool gains in real estate prices helped send the gauge of property shares to its biggest weekly loss since March. Gemdale Corp., a developer of residential buildings, slid 8.7 percent during the period. Poly Real Estate Group Co. declined 5 percent.

Nanjing, Jiangsu’s provincial capital, and Suzhou, a regional manufacturing base, earlier this month raised down-payment requirements for some buyers of second residences, adding to restrictions introduced in Xiamen, a southern port city in Fujian province, and Hefei, the provincial capital of Anhui.

The PBOC sold 14-day reverse-repurchase agreements this week, its first offering of anything with a tenor other than seven days since February, spurring speculation officials want to curb leverage in the bond market by making it less profitable for investors borrowing to buy 10-year debt. The government on Wednesday also imposed limits on lending by peer-to-peer platforms to individuals and companies in an effort to curb risks in the loosely regulated shadow-banking sector.

In Hong Kong, China Mengniu Dairy Co. rose 5.8 percent, taking its two-day gain to 18 percent, the most since 2009. The move came after JPMorgan Chase & Co. and Credit Suisse Group AG upgraded the stock.

Li & Fung Ltd. fell 3.6 percent, its biggest slide in more than three weeks. The world’s largest supplier of clothes and toys to retailers reported a 14 percent drop in first-half core operating profit on Thursday.

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