Shanghai Index Gains 1.5%; Property Curbs Tightened Further

Chandrasekhar Atreya
27 Jan, 2011
New York City

Shanghai stocks gained by nearly 1.5% while the key stock index in Hong Kong dropped on Wall Street concerns. China increased the upfront payment for second home buyers from 50% to 60% to cool prices. NRDC fines retail giants Carrefour and Wal-Mart for overpricing at check-out point.

[R]5:00 PM Hong Kong, China – Shanghai stocks gained by nearly 1.5% while the key stock index in Hong Kong dropped on Wall Street concerns. China increased the upfront payment for second home buyers from 50% to 60% to cool prices. NRDC fines retail giants Carrefour and Wal-Mart for overpricing at check-out point.[/R]

The Shanghai Composite Index gained 1.47% or 39.88 to close at 2,748.69 and the Hang Seng Index in Hong Kong lost 0.27% or 63.62 to close at 23,779.62.

Buyers of second homes in China will have to invest 60% of the value upfront, it was announced on Wednesday, up from the current 50% in the country’s latest bid to curb property speculation.

The State Council, or the Cabinet, also said that buying a third home in the city where residents already have two is banned, and residents could buy only buy one home elsewhere. Families will also be banned from buying any homes in cities if they have not been long-time residents and cannot provide tax or social insurance certificates to show the duration of their stay.

Chongqing Municipality in southwest China plans to divide houses into 10 categories and levy property tax rates based on these divisions.

“A 3% property tax will be enough to put off property speculators,” Mayor Huang Qifan said on Tuesday at a working conference of the municipal taxation and financial bureau.

Central bank will closely monitor bank lending this year and assign different reserve requirement ratios for commercial lenders based on their capital strength, the Shanghai headquarters of the People’s Bank of China said in a statement on Wednesday.

The statement also confirmed the earlier media reports that People''s Bank of China is planning to begin a monthly review of reserve ratio requirements for banks this year as the country shifted its monetary policy from relatively easing to prudent this year.

New loans for the property sector jumped again last year to make up almost a quarter of all new bank loans despite government efforts to cool the market, said the central bank.

A statement on the bank’s Web site said banks and other institutions put 2 trillion yuan into the property sector in 2010, with 591 billion for property development and the rest being for home loans to individuals.

Retail giants Carrefour and Wal-Mart are facing fines of up to 500,000 yuan ($75,954) for overpricing and cheating, according to the country’s top economic planner.

The National Development and Reform Commission said on Wednesday that an investigation found some Carrefour and Wal-Mart outlets in China were cheating customers with bogus prices or misleading price tags but charging a much higher amount at the check-out point.

China plans to expand a price-based resource tax nationwide in the next five years after trying it out in some western provinces and regions which were started last year, the Ministry of Finance said.

As commodity prices have soared, a shift from volume-based tax to a price-based tax will help raise funds to develop the resource-rich but poor areas of the country, the ministry said while conceding that it will hit profits of oil and mining firms.

Stock Movers

Mining and machinery stocks paced the gains in the index. Yunnan Tin Co surged 6.37% to 31.73 yuan and XCMG Construction Machinery Co added 7% to 51.04 yuan.

China Vanke Co, China’s largest developer, shed 2.47% to 8.30 yuan and RiseSun Real Estate Development Co dipped 6.05% to 12.12 yuan after China announced tighter controls for second home buyers.

Poly Real Estate Group dropped 4.34% to 13.24 yuan.

Chongqing Changan Automobile Co, the Chinese partner of Ford Motor, added 2.4% to 9.68 yuan after saying its net income in 2010 may have risen 86% or more to up to 2.1 billion yuan.

Dongfang Electric Co jumped the daily limit of 10% to 33.34 yuan and China XD Electric Co, a power equipment maker, also surged the daily limit of 10% to 8.22 yuan.