Beijing property move, E.U. bailout power share rally

PUBLISHED : Saturday, 29 October, 2011, 12:00am
UPDATED : Saturday, 29 October, 2011, 12:00am


Hong Kong stocks closed higher yesterday for the sixth consecutive day, led by mainland property developers buoyed by optimism that Beijing may relax controls on home-buying in the country.

Blue chips were also lifted by relief that European leaders had agreed to expand a bailout fund and by news on Thursday that economic growth had accelerated in the United States.

The Hang Seng Index rose 330.54 points, or 1.68 per cent, to close at 20,019.24, led by HSBC Holdings, which leapt 4.16 per cent to HK$70.10 to add 128 points to the index.

Li & Fung, the largest supplier to global retail giant Wal-Mart Stores, jumped 5.42 per cent to HK$15.56.

Among developers, Cheung Kong rose 2.83 per cent to HK$98.15, Sun Hung Kai Properties climbed 3.3 per cent to HK$109.60 and Henderson Land Development added 3.92 per cent to HK$42.45.

Analysts said a sharp rise in the number of home mortgages in negative equity was unlikely to hit the sector next week.

The Hong Kong Monetary Authority said yesterday the number of residential mortgages in negative equity jumped to 1,653 at the end of last month from just 48 cases at the end of June. Most of the negative equity cases were related to mortgages with loan-value ratios of 90 per cent or above, including those under the mortgage insurance programme.

The value of properties in negative equity rose to HK$4.15 billion from HK$58 million in June, representing 0.5 per cent of total outstanding mortgage loans at the end of last month.

'The rise seems stunning, but the absolute number is still very small,' said Patrick Chow Moon-kit, a research head at Ricacorp Properties.

In the second quarter of 2003, there were 105,697 negative equity cases, according to Centaline Property Agency.

Chow said home prices had fallen about 5 per cent from their peak and he saw no sign of a sharp correction in the near future.

Mainland developers also rose strongly, with Agile Property Holdings gaining 9.04 per cent to HK$7.60, Poly (Hong Kong) Investments up 6.81 per cent to HK$3.92, China Overseas Land & Investment rising 5.71 per cent to HK$15.54 and Evergrande Real Estate up 5.51 per cent to HK$3.64. The surge came a day after Jiang Weixin, the head of the Housing and Urban-Rural Development Ministry, said a government measure limiting home purchases was temporary and would be replaced by a less restrictive measure.

Jiang told the National People's Congress Standing Committee the restriction would be removed after a comprehensive real estate database is set up.

The database covers 40 cities. Jiang said the system would help the government get a basic idea of individuals' and families' property ownership status.

Mainland brokerage firm Guangfa Securities interpreted it as good news for property stocks. Although there is no timetable for the restriction to be lifted, it said Jiang's comment showed the direction in which government planned to move in the longer term.

Property developers listed on the mainland also saw sharp gains, with Shenzhen-listed Oceanwide Construction Group and Vanfund Real Estate surging to the daily limit of 10 per cent. China Vanke climbed 3.1 per cent and Gemdale Group increased 4.9 per cent.