China Property Market, Bank Worries Drag Indexes

Darlington Musarurwa
18 Dec, 2009
New York City

Chinese government targets cities to curb property speculation and People

[R]6:00 AM New York, 6:00 PM Hong Kong – Chinese government targets cities to curb property speculation and People’s Bank of China laid down 50% down payment requirement for land purchase. China investment funds to raise overseas investment cap. Banks in Shanghai and Hong Kong fell on the worries that tighter international capital regulation stricter domestic lending will hurt profits.[/R]

Stocks in Hong Kong and Shanghai dropped on tougher international capital requirements and Beijing’s measures to rein in rising property prices. Analysts and economists are increasingly worried that China may face a boom and bust cycle similar to the one in the U.S. and property and stock prices may drop sharply.

In Hong Kong trading Hang Seng Index fell 0.8% or 171.75 to 21,175.88, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, decreased 1.3% or 166.38 to 12, 334.82. In Shanghai trading, CSI 300 Index plunged 2.5% or 88.42 to 3,391.74.

Daily turnover on main-board increased to HK$69.75 billion from HK$66.60 billion yesterday.

Government Target Excessive Property Prices

People’s Bank of China reported in a statement that it has set the down payment for land purchases to at least 50% of total price. The measure is expected to curb speculation and rein in on price increase.

Before the central bank directive, China didn’t have a standard down payment rule for land purchases. The government is also targeting several cities to control price increases.

China Pension Fund to Raise International Investment Limits

China’s Securities Journal reported yesterday China’s National Council for Security Fund chairman Dai Xianglong is considering lifting the limit of the ratio of overseas investments to 20% from the present 7%.

According to Dai, the ratio of investments in fixed-income securities will be reduced, while ratio of equities investments will be maintained. The fund plans to invest in privately held overseas funds.

Average rate of return on investment of the fund in nine years was 9.4%.

Total assets of the fund by the end of October rose to Rmb700 million, with investment in equities rising 32%, investments in fixed-income securities 46% and investments in cash and equities of unlisted companies adding 22%.

Gainers & Losers

Financial stocks fell after Basel committee of international regulators recommended higher capital standards. HSBC decreased 0.9% to HK$87.45, Standard Chartered plunged 1.9% to HK$191.20.

Realty stocks fell. Minmetals Land tumbled 16.7% to HK$2.35 after announcing it will sell HK$955.5 million ($123.3 million) of new shares to its controlling shareholder.

China Construction Bank fell 1.4% to HK$6.36 and said it has adequate capital to cover its liability requirements.

Bank of China dropped 0.3% to HK$4.03 and Industrial and Commercial Bank of China plunged 1.7% to HK$6.20.

China Corn Oil increased 21.4% to HK$4.36 on its debut, while Shengli Oil & Gas Pipe Holdings was 15.5% below its issue price of HK$2.20.

Geely Automobile Holdings fell 6.4% to HK$3.95 and the company and Ford are in advanced stage of negotiation to purchase Vovlo division.

Property stock declined in Shanghai trading. China Vanke climbed down 6% to Rmb10.59 and China Merchants Property decreased 9% to Rmb26.28. Property market in China appear to be overheated as China stimulates the economy with Rmb4 trillion stimulus and sharp rise in lending.

Commodity stocks fell on a rising dollar. Jiangxi Copper fell 6.2% to Rmb37.96 and Western Mining tumbled 5.4% to Rmb14.07.

Anhui Shanying Paper Industry rose 8.3% to Rmb6.11 after announcing it projected annual profit to surge ten-fold.