Tue, Sep 26, 2017 - Page 10 News List

Stocks fall as eight Chinese cities restrict property sales

Bloomberg

Chinese property stocks plunged in Hong Kong after a raft of mainland cities added housing curbs, wrong-footing investors betting that the government’s next step would be to ease restrictions.

Eight cities, including Chongqing and Nanning, rolled out curbs over the weekend, with most banning home resales within two to three years of purchase, Xinhua news agency reported.

Shanghai-based Tospur Real Estate Consulting Co (同策房產諮詢) said six more could follow suit, without naming them.

A Bloomberg Intelligence index of 22 developers tumbled 7.5 percent as of 1:50pm yesterday, heading for its steepest drop in more than two years and taking some of the air out of valuations for stock market stars such as China Evergrande Group (恒大集團) and Sunac China Holdings Ltd (融創中國控股), which have climbed fivefold and fourfold, respectively, this year.

The latest wave of tightening comes only a week after official data showed home price gains in fewer Chinese cities, fueling optimism that the authorities might be able to limit additional property curbs. The industry is a focus of policy makers ahead of the Chinese Communist Party’s 19th National Congress slated to begin on Oct. 18, as leaders try to cool prices without tanking the economy.

“Policy risk is back in focus in the run up to mid-October, as investors watch whether more cities will follow suit in issuing new controls,” Rhb Osk Securities Hong Kong Ltd analyst Toni Ho said. “In reality, home prices in some second to third-tier cities may be stronger than the official figures.”

The latest curbs over a span of only two days show the authorities’ resolve and signal that home prices are ending across-the-board gains and could become more closely linked to cities’ economic fundamentals, Shenzhen-based analysts Hou Like of Guotai Junan Securities wrote in a report on Sunday.

Chinese developer stocks, which had been the hottest part of Hong Kong’s market in recent weeks, slumped on Friday as S&P Global Ratings’ sovereign downgrade and Logan Property Holdings Co’s (龍光地產) reported scrapping of a share placement punctured investor euphoria toward the sector.

Country Garden Holdings Co (碧桂園) and China Evergrande yesterday fell as much as 11.2 percent and Sunac as much as 9.4 percent.

New-home prices, excluding government-subsidized housing, gained in 46 of 70 cities tracked by the government last month, compared with 56 in July, the Chinese National Bureau of Statistics said last week, the smallest number of increases since January.

The nation is on a city-by-city campaign to rein in house prices and limit the risk of bubbles. Since Friday, Xian, Chongqing, Nanchang, Nanning, Changsha, Guiyang, Shijiazhuang and Wuhan have tightened housing controls, according to Xinhua.

In Shijiazhuang, buyers will be banned from reselling within five years.

At least 44 cities have imposed resale restrictions this year, Tospur research director Zhang Hongwei wrote in a note.

The curbs can not only reduce speculative buying of homes, but also prevent sharp price declines that could trigger systemic financial risk — as well as locking up investor cash that could otherwise flow abroad as the US raises interest rates, Zhang wrote.

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