Chinese property stocks hit as housing ministry instructs six provinces to conduct in-depth study of pre-sales

Chinese property stocks fell on Tuesday after a long weekend break amid reports of possible property pre-sale restrictions in Guangdong and five other provinces, while the ongoing US-China trade war continued to hurt the overall market sentiment.

The Shanghai Composite Index fell 0.6 per cent, or 16.35 points, to 2,781.14 after the market reopened following the Mid-Autumn Festival public holiday. The index closed trading on Friday with a 2.5 per cent gain to reach a six-week high of 2,797.48.

The Shenzhen Composite Index declined 0.5 per cent, or 7.80 points, to 1,437.31, while the CSI 300 Index, which tracks the Chinese big-caps, dropped 0.90 per cent, or 30.69 points, to 3,379.80.

Markets in Hong Kong were closed for public holiday on Tuesday.

According to a Reuters report on Tuesday, citing housing ministry document, six Chinese provinces – Hubei, Sichuan, Jiangsu, Henan, Guangdong and Liaoning – have been told to reconsider the pre-sale system, which is a key source for builders to finance projects

The ministry has instructed local housing bureaus of these provinces to make an in-depth study of the pre-sale system, and set out reasons why it should be retained or scrapped, the report added.

On Monday, officials in the southern Chinese province of Guangdong denied media reports that emerged on Friday that the government plans to cancel pre-sales arrangements. They, however, did not rule out the possibility that it would be considered in the future.

Leading the fall in Shanghai was Future Land Holdings, which dropped 6.3 per cent to 26.72 yuan. Poly Real Estate Group fell 6 per cent to 12.36 yuan.

“Everyone is worried that the policies from the mainland aren’t very clear,” said Kenny Tang Sing-hing, chief executive of Jun Yang Securities in Hong Kong. “Sometimes they are regulating the property market, other times it’s the price of construction materials. This will only make investors more cautious.”

Shandong Gold Group was a bright spot on an otherwise dull day. The state-owned gold miner rose 1.3 per cent to 23.81 yuan after it announced a cross shareholding agreement with Canadian miner Barrick Gold. It will purchase up to US$300 million worth of Barrick shares, while Barrick will invest the equal amount in its shares.

The agreement follows the purchase of a 50 per cent stake by Shandong Gold in the Veladero mine in Argentina from Barrick in June 2017.

Mainland Chinese financials declined.

China Merchants Bank fell 2.2 per cent to 29.62 yuan. Industrial and Commercial Bank of China shed 1.4 per cent to 5.67 yuan, while Agricultural Bank of China eased 1.8 per cent to 3.86 yuan.

The market sentiment was also hurt by rising tensions between the US and China in the ongoing trade war.

China called off a planned visit to Washington by Vice-Premier Liu He on Monday, quashing hopes of negotiations resuming between the world’s two largest economies.

Beijing also released a 36,000 word white paper on the bilateral trade frictions with the US through the official Xinhua News Agency on Monday, accusing the US of “economic hegemony” and escalating trade tensions through tariffs.