New World Development

Mainland property plays record strong gains

PUBLISHED : Tuesday, 02 June, 2009, 12:00am
UPDATED : Tuesday, 02 June, 2009, 12:00am

Mainland property stocks extended their rally yesterday amid a flood of liquidity and relaxation of capital requirements for mainland property developers.

In Hong Kong, small-cap Frasers Property (China) surged 23.2 per cent yesterday to close at 15.4 HK cents and Hopson Development Holdings jumped 21.21 per cent to HK$13.60, while CC Land Holdings, Shanghai Forte Land, Shimao Property Holdings and Agile Property Holdings all recorded gains of more than 10 per cent.

On the mainland, the two largest developers - China Vanke and Poly Real Estate - rose 4.31 per cent and 5.71 per cent, respectively.

Germadle Corp rose the 10 per cent daily limit to close at 10.02 yuan.

'Speculators are chasing after the stocks on news that the State Council is reducing the minimum capital requirement to 20 per cent from 35 per cent for developments of ordinary housing and social-security housing,' a market watcher said.

The relaxation is supposed to ease the financing pressure on developers with high gearing. However, some developers said the policy might not help much because the land price, which developers are required to pay from their own capital, already accounted for 30 to 40 per cent of the total investment of a project.

'The rally is largely because of speculators' activities targeted at short-term gains. The improving market outlook was already fully reflected in the current price,' said an analyst, warning that a deep correction is possible once the hot money retreated.

Meanwhile, shares of major Hong Kong developers extended their recent gains in response to the improving property market. New World Development took the lead by climbing 9.32 per cent to close at HK$15.96.

Sino Land dropped 0.7 per cent to HK$14.28 on profit-taking.