Property fears trip China, Hong Kong shares; earnings lifts Belle

Last Updated: Mon, Feb 24, 2014 09:54 hrs

China shares suffered their biggest loss in seven weeks on Monday, hurting Hong Kong markets, after mainland news reports stoked fears that banks have tightened loans to property developers.

Monday's losses, which erased a recent rebound for Chinese property shares, were rooted in fears of new moves by authorities in their four-year campaign to rein in risks of a possible asset-bubble as home prices have surged.

"I would get out of interest rate-sensitive sectors. It's very hard to navigate right now with policy risk on the rise," said Hong Hao, Hong Kong-based chief equity strategist at Bank of Communication International.

"Property prices in many cities are still rising and that's not a good sign coming ahead of the annual parliamentary meetings," Hong added.

Those meetings are due to start March 5 in Beijing.

The Shanghai Composite Index finished down 1.8 percent, while the CSI300 of the biggest Shanghai and Shenzhen A-share listings sank 2.2 percent. For both, this was their largest one-day loss since Jan. 6.

The China Enterprises Index of leading Chinese listings in Hong Kong slid 1.4 percent. The Hang Seng Index sank 0.8 percent to 22,388.6 points, slipping back below its 200-day moving average, which it held for most of last week.

All four indexes finished off the day's lows, and volumes slowed in afternoon trade. In Shanghai and Hong Kong, losers outnumbered gainers about 2-1.

China Vanke, the largest property developer by sales, dropped 6.6 percent in Shenzhen after plumbing its lowest in more than five years. Poly Real Estate slumped 8.5 percent in Shanghai, whose property sub-index slid 5.4 percent, its biggest loss in eight months.

Country Garden and Shimao Property tanked 8.3 and 7.8 percent, respectively. Blue chip China Resources Land dived 5.7 percent.

The official Shanghai Securities News reported on Monday that Industrial Bank and other banks may have stopped extending some loans to property developers and tightened lending to other property-related sectors such as steel, cement and construction.

Local media reported several banks issued denials. Mid-sized Industrial Bank did not respond to calls from Reuters seeking comment, but Bank of America-Merrill Lynch China economists said the types of financing stopped should account for only a small part of Industrial Bank's property-sector exposure.

Still, Industrial Bank shares declined 3.7 percent in Shanghai, while China's biggest cement producer Anhui Conch Cement tumbled about 5 percent in both Hong Kong and Shanghai.

In January, average new home prices in China's 70 major cities rose 9.6 percent from a year earlier, easing from the previous month's 9.9 percent rise, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Monday.

In a front page editorial on Monday, the official China Securities Journal said that unusually high investment in China's property market over the past decade will "for certain" cool as part of the broader slowdown in the world's second-largest economy.


Shares of China-focused shoe retailer Belle International surged almost 6 percent in Hong Kong after it said 2013 net profit rose 3.2 percent. That buoyed rival Daphne International, whose shares rose 4 percent.

HSBC Holdings shares slipped 0.5 percent in Hong Kong ahead of its 2013 full year profit after market close, which at $22.6 billion was lower than expected. Its London shares were down 4.7 percent at 0850 GMT.

In the last 30 days, nine of 31 analysts downgraded their 2013 earnings-per-share estimates for HSBC by an average of 5.5 percent, according to StarMine.

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