Chinese stock investors punished the nation’s biggest property developers and banks Monday on mixed signals about the health of the real estate industry.
One securities firm (China Merchants Securities) cited a "panic mood" on the Shanghai, Shenzhen and Hong Kong exchanges among property market investors.
What many considered good news Monday came from a government report pointing to slower growth for new home prices in major cities, easing concerns about a possible burst for what some call a bubble market.
The National Bureau of Statistics said its monthly survey of 70 cities found the average price of a newly built home rose 0.49% in January from the month before, compared to a 0.51% jump between December and November. The data stoked hopes for a more sustainable property market, which Beijing policymakers have been trying to engineer for years through credit and interest rate controls.
But bad news for stocks came from securities analyst and media reports that some banks had suspended real estate lending in cities affected by collapsing demand for new homes.
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The newspaper 21st Century Business Herald said "provisions and notices" of frozen credit had been issued in recent days by the Bank of Communications, China Merchants Bank and China Citic Bank. The official Xinhua news agency said Industrial and Commercial Bank of China had "suspended loans to some property projects until the end of March."
The country’s largest state-owned banks — Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China — denied any suspensions for their real estate lending, according to a report on the Sohu business Web portal.
But bank stocks took a beating anyway, with ICBC losing 2%, Bank of China off 1.7% and ABC down 1.2% on mainland exchanges Monday.
A sell-off ensued on the Shanghai, Shenzhen and Hong Kong stock markets for major developers. Poly Real Estate saw its stock price lose 8.5% to close at 6.77 yuan per share in Shanghai, while China Vanke shed 6.2% on the Shenzhen board. Shares in Hong Kong-listed China Resources Land declined 5.7%.
The sector’s weakness has come to light gradually in recent weeks. Last week, for example, China Resources Land said its 3.45 billion yuan in total sales for January represented a 58% decline year-on-year.
Tumbling demand for real estate has reportedly affected several cities. Last week in Hangzhou, for example, property developers slashed prices in the face of 120,000 unsold units.
"It’s an indisputable fact that attitudes toward real estate are changing" among investors, according to a Huatai Securities report Monday. "In terms of financial situations, there may be big changes in the future for the real estate industry."
This article was republished with permission from TheStreet.