China"s Stocks Decline, Led by Property, Material Companies

China’s stocks fell for the ninth

time in 10 days, dragged down by property developers and

material producers, after Beijing tightened rules for real

estate projects to contain a rebound in home prices.

China Vanke Co., the nation’s biggest developer, slumped

3.4 percent on speculation stricter property curbs will hurt

earnings. Anhui Conch Cement Co., the largest producer of the

building material, declined to a nine-month low. Tasly

Pharmaceutical Group Co., a traditional medicine company, led

drugmakers to the biggest gain among industry groups.

The Shanghai Composite Index (SHCOMP) slipped 0.3 percent to

2,156.22 at the close, with trading volumes 24 percent lower

than the 30-day average. The index fell last week after reports

showed industrial production and exports trailed estimates and

higher money-market rates stoked concern about tighter

liquidity. The CSI 300 Index dropped 0.5 percent to 2,403.84.

The Hang Seng China Enterprises Index (HSCEI) gained 1.1 percent,

snapping 12 days of losses.

“Investors are still digesting news about bad economic

data and tight liquidity,” said Mao Sheng, an analyst for Huaxi

Securities Co. in Chengdu. “The lack of flows in the market may

persist until early July. People are avoiding companies such as

property developers because of the economic concern. We may see

occasional technical rebounds, but any gains will be

temporary.”

Beijing Curbs

The Shanghai measure has fallen 11 percent from this year’s

high on Feb. 6. The index trades at 8.9 times 12-month estimated

earnings, compared with the three-year average of 10.8, data

compiled by Bloomberg showed. Its 30-day volatility was at 15.9,

compared with this year’s average of 19.1, the data showed.

The government may release foreign investment data as early

as today, while May housing prices are scheduled for tomorrow.

China’s home prices rose 10.7 percent in the first quarter of

2013 from the previous three months, the biggest gain among 55

global real-estate markets, according to Knight Frank.

A gauge of property stocks in the Shanghai index declined

0.7 percent, the most among five industry groups. China Vanke

dropped 3.4 percent to 10.33 yuan. Poly Real Estate, the second-biggest developer, fell 0.9 percent to 10.97 yuan, while Gemdale

Corp. lost 1.9 percent to 6.64 yuan.

Anhui Conch paced declines for material producers, dropping

1.8 percent to 14.20 yuan. Jiangxi Copper Co., the biggest

Chinese copper producer, slid 1.8 percent to 18.93 yuan.

Tightening Outlook

Beijing will require non-residential projects and

residential developments bigger than an average 140 square

meters (1,506 square feet) to meet requirements on construction

progress before applying for presale permits, the local housing

bureau said June 14. China requires developers to obtain presale

permits from local housing authorities before they can sell

apartments under construction.

“Beijing’s new pre-sales measures imply housing policies

may become more localized,” Credit Suisse Group AG analyst

Jinsong Du wrote in a note dated yesterday. “Although this new

measure should not have near term impact on Beijing’s housing

supply, some may view it as a sign of further tightening

measures to come.”

A gauge of drugmakers in the CSI 300 rose 1.9 percent, the

most among 10 industry groups. Yunnan Baiyao Group Co. surged

5.1 percent to 88.20 yuan. Tasly climbed 2.5 percent to 41.31

yuan. Tasly is optimistic over the next few years about its

product Tasly Danshen Plus Capsule, which recorded 2 billion

yuan in sales in 2012, Fortune CLSA Securities Ltd. wrote in a

report dated today, citing meetings with company officials.

Tackle Pollution

“In China specifically, we like health-care names because

of the reforms the government is putting in place,” Catherine Yeung, director at Fidelity Investment Management Ltd., said in

a Bloomberg TV interview in Singapore today. “Over the weekend

the State Council came up with 10 measures with regards to

improving air quality.”

China’s cabinet adopted a 10-point plan to tackle pollution

on June 14. The efforts include increasing levies on the

discharge of pollutants, controlling high energy-consuming and

polluting industries and improving control of airborne particles

measuring less than 2.5 microns in size, known as PM2.5.

The package “is the first milestone in the country’s anti-pollution campaign which could last for 18 years,” Ma Jun,

Deutsche Bank’s chief economist for Greater China in Hong Kong,

wrote in a note. “In the next few years, dozens of more

specific policy measures will be needed.” Those may involve

limits on coal consumption for key regions and increased

subsidies for shale gas, wind and solar, he said.

China may introduce policies on solar power subsidies as

early as June, the China Securities Journal reported today,

citing unidentified people. Hareon Solar Technology Co. surged 2

percent to 6.71 yuan.

Bearish Options

Options traders are paying the most in two months to

protect against drops in the largest Chinese exchange-traded

fund (FXI) in the U.S. on concern a local money-market cash crunch

will deepen a slump in Asia’s biggest economy.

The cost of three-month puts on the iShares FTSE China 25

Index Fund (FXI) soared to the highest since September last week,

option data compiled by Bloomberg showed. The 4.3-point premium

of puts over calls was the widest since April 17. The Bloomberg

China-US Equity Index slumped the most in four months last week,

led by a 16 percent drop in Yanzhou Coal Mining Co.

The World Bank, Morgan Stanley and UBS AG all cut 2013

gross domestic product estimates for China last week. China can

manage to see a rebound in growth if the government conducts

necessary reforms including opening up some areas to private

investors ranging from high-speed railways to water supply, Li Daokui, a former academic adviser to the People’s Bank of China,

said at a forum in Beijing on June 15.

To contact the reporter on this story:

Weiyi Lim in Singapore at

wlim26@bloomberg.net

To contact the editor responsible for this story:

Darren Boey at

dboey@bloomberg.net

China"s Stocks Decline, Led by Property, Material Companies