The benchmark gauge of China has experienced its biggest loss since November, 2011, as further restrictions were imposed on the property industry. The investors, as a result, became concerned of less demand for construction materials and bank loans. Incidentally, the gauge that measures the Shanghai developers experienced a drop of 2.1% and is all set to have the biggest weekly decline since last July. The Chinese Government has ordered the local authorities to halt the real estate speculation by introducing measures such as home price control targets and property tax expansion. The Shanghai Composite Index or SHCOMP dropped by 3% and is at 2325.95 currently. The CSI 300 also declined by 3.4% and is at 2610.55 now. It actually has declined the most since August, 2011. In Hong Kong, the Hang Seng China Enterprises Index went down by 3.2%. The overall trading volume in Shanghai was 9% less than the average of last 30 days.
According to the Analyst of Tebon Securities Co., Huang Cendong, more details on the property measures are expected to come out by end of this week. Huang also stated that if the property curbs extend to the 2nd and 3rd tier cities as well, the economic growth of China will be impacted.
The property index of Shanghai went down by 6% in this week. The biggest cement producer in China, Anhui Conch, went down by 5.4% and is currently at 18.72 Yuan. The largest automaker of the country, SAIC Motor Corp. saw its shares plunging by 5% and each share is currently priced at 17.14 Yuan. Huaxin Cement Co. tumbled by 6% and each of its shares is at 15.21 Yuan now. China Vanke Co. and Ply Real Estate Group Co. suffered declines of 1.1% and 0.7% respectively.
The mortgage and down-payment requirements have been increased by the Chinese Government in its attempt to tighten the property market. The Government has implemented a property tax in Shanghai for the 1st time and home purchase restrictions have been implemented in around 40 cities in total. In January, the home prices increased by 1%, in comparison to where it was in December.
The 2nd biggest lender of China, China Construction Bank also suffered decline of 2.9%. As far as earning reports are concerned, mortgage loans made 20% of the lender’s total loan portfolio by the end of June.