China Raises Property Loans Curbs

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
07 Jun, 2010
New York City

Stocks in China fell on a weakness in property developers as China tightens mortgage lending rules. Global worries also contributed to the weak sentiment after U.S. reported weaker than expected jobs data and rising worries in the euro-zone.

[R]5:00 PM Hong Kong, China – Markets in China region fell sharply following weak jobs report in the U.S. Rising curbs to property buyers and continued jitters in the euro-zone also contributed to the weakness. BoCom launches jumbo rights offering. Angang Steel denies Baotou Steel acquisition talks. HK Electric plans to buy 25% of Seabank Power from Cheung Kong Infrastructure.[/R]

Stocks in China fell on a weakness in property developers as China tightens mortgage lending rules. Global worries also contributed to the weak sentiment after U.S. reported weaker than expected jobs data and rising worries in the euro-zone.

In its effort to further curb the housing bubble, the Chinese government said today that it will apply tighter second-home mortgage policies to those loan applicants who cannot provide proof of at least one year of local social security contributions or tax payments.

Banks can suspend loans to such home buyers in regions where home prices are too high, rising too fast, or residential property is in short supply, the Ministry of Housing and Urban-Rural Development, said in a statement on its website.

Chinese companies are increasing wages after a recent spate of suicide. Foxconn International and TPV Technology are the latest two companies to increase wages.

Bank of Communications Co led the pace of declines after it cut the size of its rights offering.

Hang Seng index in Hong Kong decreased 401.92 or 2.03% to 19,378.15 and CSI 300 index in China dropped 48.68 or 1.77% to 2,695.72.

Bank of Communications Co, China’s fourth-largest lender by market value, cut its rights offer to a total of 7.35 billion Shanghai and Hong Kong-traded shares at 4.5 yuan or its HK dollar equivalent value, which is 20% lower than the amount approved by the shareholders and the China Securities Regulatory Commission.

Bank of Communications may also sell subordinated bonds, Vice President Qian Wenhui said in Shanghai today. The rights offer is expected to boost its core capital adequacy ratio by 1.6 percentage points and giving the bank the right to raise about 8 billion yuan in supplemental capital, he said.

Agricultural Bank of China, had plans to sell a 15% stake in its IPO for $30 billion, according to its prospectus of June 4. It may now be able to raise only as much as $23.4 billion after the share markets slumped bringing down share prices across the board.

Beijing-based Agricultural Bank has plans to sell 22.235 billion shares in Shanghai and 25.411 billion shares in Hong Kong, excluding an over-allotment option, according to a document posted on the securities regulator’s Web site.

Xinjiang Goldwind Science & Technology Co is also planning a Hong Kong share sale amounting to $1 billion to expand sales of wind turbine in the U.S. and Europe.

Urumqui-based Xinjiang expects the proceeds to generate HK$8 billion out of which it will spend 40% on building plants, 24 on expansion overseas, 15% on design and development, 11% on repayment of loans and the rest as working capital. The firm currently gets 99% of its revenue from China and expects to diversify from international sales.

Shanghai Movers

Bank of Communications Co., Ltd dropped 3.2% to 6.18 yuan after the lender launched its rights issue. To strengthen its capital base and consequently improve its core capital adequacy ratio, the lender will sell 7.35 billion rights shares on a 1.5-for-10 basis.

China Railway Construction Corporation Limited rose 0.7% to 7.24 yuan after the company won a contract to build apartments in Papua New Guinea from Steamships Limited, a subsidiary of The Swire Group, reports Shanghai Securities News.

China Merchants Bank Co., Ltd fell 2.8% to 12.80 yuan after the lender expects its net interest margin to rise for the rest of the year, the South China Morning Post cited Qin Xiao, the lender’s chairman, as saying.

China Vanke Co., Ltd, the developer, fell 2.2% to 7.12 yuan.

Daqin Railway Co., Ltd fell 0.8% to 8.26 yuan.

Gemdale Corporation, the developer, fell 0.7% to 6.54 yuan.

Poly Real Estate Group Co., Ltd, the developer, fell 2.5% to 10.63 yuan.

[HK Movers

Angang Steel Company Limited fell 7.1% to HK$9.34 after China Business News quoted the company said its meeting on May 26 and 27 with Baotou Steel during May 26th was related to normal business only. Market rumors suggested acquisition talks.

ASM Pacific Technology Limited fell 0.7% to HK$64.15 after the maker of semiconductor-wiring machines was upgraded to “overweight” from “equal-weight” at Morgan Stanley.

Cheung Kong Infrastructure Holdings Ltd fell 0.5% to HK$27.70 after the operator of power plants and toll roads said Hong Kong Electric Holdings Ltd. will buy a 25% stake in Seabank Power Ltd. of the U.K. from Cheung Kong Infrastructure Holdings Ltd. for £108.1 million (HK$1.23 billion), Hong Kong Electric and CKI said in a joint statement Friday.

China Merchants Holdings (International) Co. Ltd fell 3.5% to HK$23.35.

Foxconn International Holdings Limited fell 5.5% to HK$5.66 after the company said for the second time in less than a week that it will raise employee wages, more than doubling base salaries at its Shenzhen factories within four months, after being criticized over worker suicides.

Industrial and Commercial Bank of China Limited, the lender, fell 1.7% to HK$5.59.

TPV Technology Limited fell 2.0% to HK$4.80 after the contract manufacturer of computer monitors said it plans to raise wages in China by another 15% to 20% this year to retain staff following a 15% increase in January.