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China Stocks Fall Most In Month, Led By Cement, Property Shares
Perspective | 22 February 2013

China’s stocks fell the most in a month after valuations for the benchmark index climbed to the highest level in 17 months and on concern the government may introduce measures to curb property prices next month.

Poly Real Estate Group Co. slumped 5.1 percent, dragging down a gauge of developers after China Business News said the government may impose real-estate curbs around a legislative meeting in March. Anhui Conch Cement Co., the nation’s biggest producer of the building material, slid the most since September 2011 after the government estimated slowing cement output growth. BYD Co., the carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., slid the most in almost a month.

The Shanghai Composite Index fell 1.6 percent to 2,382.91 on 19 February, its biggest loss since 11 January. It slid for a second day after a week-long holiday for the Lunar New Year. The CSI 300 Index lost 1.9 percent to 2,685.61.

“There’s been speculation that there will be more property tightening as home prices have not fallen,” Zhang Lei, an analyst with Minsheng Securities Co., said by phone from Beijing. “This talk is still making the rounds and there are expectations more measures will be announced. Stocks are also down after rallying a lot.”

The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong retreated 0.9 percent on 19 February. The Shanghai index has risen 22 percent from a three-year low on 3 December on signs economic growth is accelerating. The gauge was valued at 13.2 times reported profit on 18 February, the highest level since September 2011, data compiled by Bloomberg show.

RSI Signal
The Shanghai index’s 14-day relative strength index was at 69 on 18 February. Some analysts see a reading of more than 70 for the RSI, which measures how rapidly prices have advanced or declined during the specified time period, as a signal to sell. Trading volumes were 6.7 percent lower than the 30-day average on 19 February, according to data compiled by Bloomberg.

A gauge of property stocks in the Shanghai index slid 4.6 percent, the most among five industry groups. China Vanke Co., the nation’s biggest developer, slumped 4.3 percent to Rmb11.20. Poly Real Estate declined 5.1 percent to Rmb12.22.

China may introduce more policies to curb property prices before or after the National People’s Congress annual session next month, China Business News reported on 19 February, citing Xie Yifeng, head of the Asia-Pacific City Development Research Center’s real estate institute.

Property Curbs
“There’s expectation for more tightening measures as property prices in some cities are still rising,” said Zhu Jixiang, an analyst at CSC International in Shanghai. In an effort to tighten the property market, the government has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, and enacted home- purchase restrictions in about 40 cities.

In a report on 6 February, the central bank signalled inflation and the housing market remain concerns and said it will maintain a prudent monetary policy. One-year interest-rate swaps rose the most in four weeks on 19 February after the central bank drained funds from the financial system for the first time in eight months.

Anhui Conch slid 7.6 percent to Rmb19.72. Huaxin Cement Co. fell 7.2 percent to Rmb16.27 on 19 February. The Ministry of Industry and Information Technology forecast cement output growth of less than 5 percent this year, compared with 2012’s 7.4 percent gain.

China’s stocks on 18 February dropped on concern growth in retail sales slowed during the Lunar holiday. Sales at shops and restaurants monitored by the Ministry of Commerce increased 14.7 percent in the 9 February to 15 February holiday period from the year- earlier break to Rmb539 billion (US$86 billion). That was down from a 16.2 percent pace in 2012.

“The economy is recovering, but we are unsure if it’s going to be a strong rebound or a weak improvement,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “This can be seen from the declines in property and auto stocks.”

BYD paced declines for consumer-discretionary companies, sliding 3.8 percent to Rmb26.15. SAIC Motor Corp., the biggest Chinese automaker, fell 4.5 percent to Rmb17.86. Gree Electric Appliances Inc. slumped 2.5 percent to Rmb28.52.

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