Markets
China stocks tumble most in 8 months on property loan curbs
(Agencies)
Updated: 2010-04-19 15:40
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Property 'heroin'
China's latest moves to cool its property market come after previous measures failed to slow gains in housing prices, which rose at a record 11.7 percent in March. The world's third- biggest economy this year told banks to set aside more deposits as reserves, raised mortgage rates and re-imposed a sales tax on homes.
Prices of mid- and high-end properties may tumble 20 percent and monthly transaction volumes may slide more than 50 percent in the coming months, Ma said.
The rally in property prices prompted former Morgan Stanley economist Andy Xie to call the nation's asset markets a bubble that will burst once the government curbs credit. China is "on a treadmill to hell," with growth driven by the "heroin of property development," hedge fund manager James Chanos said this month.
Banks declined on concern non-performing loans may increase. Industrial & Commercial Bank of China Ltd lost 4.7 percent to 4.67 yuan, the most since Oct 29, 2008. Bank of China Ltd, the third-largest lender, retreated 2.9 percent to 4.08 yuan. Industrial Bank Co dropped 8 percent to 31.10 yuan.
Asset quality concerns
"The latest measures on third-home mortgages will exacerbate concerns of asset quality and lower earnings estimates," Chen Qi, a Shanghai-based analyst at CSC Securities HK Ltd, said in a telephone interview today.
China has this year targeted a 22 percent reduction in new loans from a record of $1.4 trillion and twice asked lenders to set aside more cash as reserves to prevent the economy from overheating.
Gross domestic product grew 11.9 percent in the first quarter from a year earlier, the biggest gain since the second quarter of 2007, the statistics bureau said last week.
Baoshan Iron & Steel Co, the nation's largest steelmaker, slumped 5.9 percent to 7.19 yuan. Anhui Conch Cement, the largest cement producer, plunged 5.8 percent to 39.42 yuan, a sixth day of losses. Jiangxi Copper Co, the country's biggest producer of the metal, slipped 5.1 percent to 34.99 yuan. PetroChina dropped 2.8 percent to 12.67 yuan.
'Austerity' measures
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Investors should avoid property, banking, steel and construction material stocks as market reaction to the "austerity" measures may be negative in the near term, Jerry Lou and Allen Gui, Morgan Stanley analysts, wrote in a note to clients. They said a property tax is "finally coming close".
Shanghai may tax individuals who own multiple properties, the China Times reported, citing an unidentified person close to the Ministry of Finance.
