Mainland property stocks slump after Vanke cuts prices to lift sales

PUBLISHED : Tuesday, 09 September, 2008, 12:00am
UPDATED : Tuesday, 09 September, 2008, 12:00am

Mainland-listed property stocks slumped yesterday amid media reports of price cuts by market leader China Vanke to boost sales amid a slowing economy.

Vanke dropped 5.66 per cent to 6 yuan (HK$6.84) in Shenzhen; Poly Real Estate Group, the second-largest by market value, slumped 9.89 per cent to 12.03 yuan, while Shanghai's Industrial Development slid the 10 per cent daily limit to 8.33 yuan.

Several mainland newspapers including Shanghai Securities News yesterday said Vanke had cut prices for its project in Hangzhou. That came after previous reports suggested the developer had been offering discounts on its eight projects in Shanghai.

The slump in property plays dragged the benchmark Shanghai Composite Index down 59.025 points or 2.68 per cent to a 21-month closing low of 2,143.421 on turnover of 27.7 billion yuan.

'It's hard to figure out the negative factor dragging down the property plays from the performance of a single trading day,' said an analyst.

Still, analysts are generally pessimistic about the outlook of the mainland property market as potential homebuyers adopt a wait-and-see attitude.

Slowing transactions and tightened bank loans have been putting pressure on developers' cash flows, prompting them to cut prices to boost sales for fresh capital to service their debts.

'I think October could be even worse, as many developers would be in great financial trouble after they realise their sales targets cannot be achieved after the National Day holiday - a traditional hot period for property sales. That would trigger price cuts across the nation,' the analyst said.