Beijing stance on property sparks sell-off in stocks

PUBLISHED : Thursday, 15 March, 2012, 12:00am
UPDATED : Thursday, 15 March, 2012, 12:00am


Mainland stocks yesterday posted their biggest single-day loss in more than three months as Premier Wen Jiabao ruled out relaxing property controls.

The Shanghai Composite Index closed 2.63 per cent lower, its biggest daily fall since November 30. Property stocks led the decline.

Wen yesterday said housing prices were far from affordable for ordinary citizens, and pledged to maintain the curbs to cool the property market.

His comments signalled there will not be any major relaxation of cooling measures on his watch, contrary to recent speculation that some local governments would ease restrictions on home purchases.

Among the biggest losers of the day, Shanghai Lujiazui Finance & Trade Zone Development fell 6.1 per cent and China Enterprise dropped 8.9 per cent. Property stocks have been among the market bellwethers this year, with investors expecting the authorities to waive controls on property purchases to revive the housing market.

'The premier's statement wasn't a surprise but it still made those expecting a policy easing extremely disappointed,' said Haitong Securities analyst Zhang Qi. 'The sell-off was overdone and the market could rebound soon.'

Wen made similar comments at the opening of the National People's Congress this month, reiterating that Beijing would continue to regulate the market to bring down property prices to reasonable levels.

'For first-time buyers, we will see some relaxation on mortgage lending, aiming to help more residents buy homes,' said Alan Jin, an analyst at Mizuho Securities.

'As the housing market is unlikely to see a recovery this year, more developers will speed up sales by slashing prices in the second quarter.'

Earlier this month, the Big Four state banks, which account for about 40 per cent of the loans in the country, said they would lend more to qualified developers to boost entry-level housing supply.

Property stocks have a huge impact on the overall market's performance because the real estate sector is one of the driving forces of the economy. A weak property sector normally drags down growth in other related industries such as banking, construction materials and home appliances.

Jin said he expected the property market to shrink 10 per cent this year. In cities facing oversupply, developers would offer big price cuts.