SHANGHAI: China's crackdown on the real estate market may trigger an estimated 400 billion yuan ($58.6 billion) to flow out of property and into equities, according to the nation's largest brokerage.
The funds may be diverted into consumer-related stocks with small capitalizations and companies that may benefit from increased government spending in poorer regions, analysts led by Yu Jun at Beijing-based Citic Securities Co said in a report.
"The recent measures introduced by the government on property are just the beginning," wrote Yu. "The crackdown will prompt large pools of funds to enter the stock market."
China's property stocks have plunged 19 percent this year, making them the worst performers among all industry groups, after the government stepped up efforts to contain a housing bubble as previous measures failed to prevent property prices from surging by a record 11.7 percent in March.
The nation's securities regulator on April 24 required developers to submit fund-raising plans for review, adding to curbs imposed by the central bank on loans for third-home purchases, increased down payment requirements and mortgage rates announced this month.
Rising property prices are a "major risk" to the economy and the government must rein in speculation in the real estate market, central bank adviser Li Daokui said on April 24 in Beijing.
The Shanghai Composite Index has fallen 9 percent this year, as the government unwinds monetary stimulus and reins in lending to curb asset bubbles. The measure rallied 80 percent in 2009.
"China is in the throes of a vast property mania," said Andy Xie, an independent economist based in Shanghai and formerly Morgan Stanley's chief economist for the Asia-Pacific region, said in a commentary for Bloomberg News.
The government's measures have already damped investor sentiment toward property, according to a survey by SYWG BNP Paribas Asset Management Co and China Business News, which found 87 percent of respondents expect home prices to decline following the clampdown.
BNP Paribas and Citigroup Inc predicted last week in separate reports that home prices may drop as much as 20 percent as tightening measures take hold. A "turning point" in the real-estate market is "unavoidable", Citigroup said.