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Daniel Ren

Peggy Sito

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.



Beijing stance on property sparks sell-off in stocks