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Index down 5.6% led by property developers

(Agencies)
Updated: 2008-04-14 15:31

China A-shares closed sharply lower led by property developers amid market rumors that the government plans to announce new macro controls seeking to curb speculative property investment, dealers said.

About 20 property stocks, including the largest listed developer China Vanke, tumbled by the 10 percent daily limit.

The benchmark Shanghai Composite Index closed down 196.22 points or 5.62 percent at 3,296.67, the largest percentage drop since January 28.

Turnover rose to 66.95 billion yuan ($9.56 billion) from 58.99 billion in the previous session.

"There are rumors that the government may carry out a nationwide investigation on speculative property investments, and use tax and other levers, including a tighter review of mortgage qualifications, to curb such investment," said Cao Xuefeng, an analyst at West China Securities.

"Further policy tightening, if true, could send some developers into financial distress," Cao added.

Wu Feng, an analyst at TX Investment Consulting, said that property developers as well as financial institutions were hit heavily as they are already under liquidity pressure following previous rounds of policy tightening.

China's central bank said late Friday that its policy tightening has shown marked results. It said growth in M2 money supply in March was 16.29 percent year-on-year, down from 17.5 percent in February and 18.9 percent in January, while new yuan loans extended in March decreased by 158.3 billion yuan from a year earlier to 283.4 billion yuan.

Analysts said a more than 2 percent drop on Wall Street also discouraged the A-share market.

"The weak A-share market is sensitive to any fall in other markets, although it may not react much when others gain," Wu noted.

Financial stocks turned lower despite reporting strong 2007 or first quarter results.

Shanghai Pudong Development Bank lost 7.52 percent to 32.20 yuan. The bank said it expects first quarter net profit to have risen by over 180 percent year-on-year.

China Pacific Insurance shed 5.67 percent to 25.61 yuan despite reporting that 2007 net profit surged nearly 584 percent to 6.89 billion yuan.