Mainland Chinese property stocks surge on talk of easing

Shares of mainland property companies in Shanghai and Shenzhen jumped on speculation yesterday that the central government will ease financing for developers to alleviate a credit crunch.

Smaller developers, including Shenzhen-listed Zhongrun Resources Investment and Tianjin Guangyu Development, and Shanghai-listed Hainan Zhenghe Industrial, surged by the 10 per cent daily limit.

"There were rumours [in the] morning that the China Securities Regulatory Commission would allow developers to issue new shares to boost capital," said Zhang Qi, a Shanghai-based analyst with Haitong Securities. Unlisted developers are reportedly to be allowed to seek a listing on the mainland exchanges via backdoor listings.

While attributing the speculative news as a reason for the surge in mainland property stocks, Zhang said the sector was attractive. The price-earnings ratio of leading players such as China Vanke was just seven to eight times, against the market's average of 11 times, Zhang said.

Speculation about the eased financing and backdoor listings move followed a report this week that Greenland Group was seeking a backdoor listing on the Shanghai Stock Exchange. The Shanghai-based developer was planning to do so by buying Shanghai Jinfeng Investment, said SouFun Holding, the nation's biggest property news website.

Huatai Securities analyst Zhou Lin was dismissive about the market rumours, saying the rise in developers' shares yesterday was triggered by the recent strong land sales.

Mainland cities have seen prices on land bids surge amid the waning effects of cooling measures, Xinhua said. A lot in central Beijing was sold for 1.77 billion yuan (HK$2.22 billion) on Wednesday, and Poly Real Estate Group and China Vanke that day paid 2.36 billion yuan and 4.87 billion yuan, respectively, for lots in Shanghai. The Shanghai Composite Index added 0.05 per cent to 2,007.20 points, but the Shenzhen Composite Index fell 0.66 per cent to 922.44.