Monday 4 March 2013

Property stocks sink Shanghai, support Tokyo

By Sarah Turner and V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Mainland Chinese stocks suffered their worst drop in several months on Monday as property and construction-related sectors got slammed after Beijing imposed fresh measures to cool home prices.
The deep losses rubbed off on most other markets in the region, and on Hong Kong-listed Chinese developers in particular. The Japanese market was an exception, with real-estate shares extending their recent surge on an improved outlook amid sustained hopes for a policy boost to the economy.
China’s Shanghai Composite Index CN:000001 -3.65%  sank 3.7% for its worst percentage drop since August 2011, while the Shenzhen Composite Index fell 3.5%, for its steepest fall since July.
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The drop came after the State Council, China’s cabinet, late on Friday announced restrictions, including higher down-payments and mortgage rates on second homes in cities that have seen steep rises in property prices. The policy moves also include a 20% capital gains tax on existing-home sales. Read China adviser’s warning cubs may hit demand.
“The edict marked a reversal of an implicit softening of property controls since spring 2012. ... Markets should definitely take the edict seriously and be prepared for falling prices of related financial assets,” said Ting Lu, a China economist at Bank of America Merrill Lynch.
Ahead of the start Tuesday of the annual session of the National People’s Congress, China’s parliament, “the edict is effectively the last policy announcement of Premier Wen [Jiabao]’s 10-year cabinet,” he said.
The fresh curbs, which come ahead of Tuesday’s start of the annual session of the National People’s Congress — China’s parliament — were however, unlikely to be a turning point for Chinese economic policy, Lu said. “We believe China’s policy stance in the first half of 2013 is still growth-supportive,” he said.
Stocks that dropped by the day’s permissible limit of 10% included Poly Real Estate Group Co. CN:600048 -9.98% , Shanghai Industrial Development Co. CN:600748 -10.05%  and Anhui Conch Cement Co. HK:914 -4.79%   AHCHF +2.43%  in Shanghai; in Shenzhen, China Vanke Co. CN:200002 -6.13% and Cofco Property Group Co. CN:000031 -10.00%  fell by the day’s 10% limit.
Chinese developers also got hammered in Hong Kong, with China Resources Land Ltd. CRBJF -4.64%   HK:1109 -8.85%  losing 8.9% and China Overseas Land & Investment Ltd. HK:688 -7.14% CAOVY -6.18% shedding 7.1%, while Guangzhou R&F Properties Ltd. slumped 10.9%.


Hong Kong’s benchmark Hang Seng Index HK:HSI -1.50% declined 1.5%. Elsewhere, South Korea’s Kospi KR:SEU -0.66% fell 0.7% and Australia’s S&P/ASX 200 AU:XJO -1.49% dropped 1.5%.
But Japan’s Nikkei Stock Average JP:100000018 +0.40%  rose 0.4%, with the real estate and financial sectors holding firm on an improved outlook.
Shares of Mitsui Fudosan Co. JP:8801 +2.38% MTSFF +3.59% climbed 2.4% and Sumitomo Realty & Development Co. JP:8830 +3.92% SURDF +2.81% jumped 3.9%, while Mitsubishi UFJ Financial Group Inc. MTU +0.53%   JP:8306 +1.53%  rose 1.5%.
Miners dropped during the session after the precious metal’s prices on Friday ended at their worst level since July last year, and copper futures fell to a three-month low. Read: Gold down a third day, at lowest since mid-July.
Rio Tinto Ltd. AU:RIO -2.24% RIO -3.15%  fell 3.7%, BHP Billiton Ltd. AU:BHP -2.82%   BHP -1.57%  — trading ex-dividend — lost 3.5%, and gold miner Newcrest Mining Ltd. AU:NCM -0.09% NCMGY -0.67%  shed 1.1%.
Hong Kong-listed Russian metals giant United Co. Rusal PLC HK:486 -3.43% lost 3.4% after the firm said that it will cut 300,000 tons from its aluminum output by the end of 2013.
Market major Samsung Electronics Inc. KR:005930 -0.32%   SSNLF +1.69% slipped 0.3%, less than the broader market. The performance follows a U.S. court ruling Friday that slashed the amount of damages the firm has to pay arch-rival Apple Inc. AAPL -2.03%  by around 43%, to just under $600 million.
Sarah Turner is MarketWatch's bureau chief in Sydney. Follow her on Twitter @SarahTurnerMKTW. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.
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