By V. Phani Kumar
Shares of mainland Chinese property developers sank in Hong Kong
trade Tuesday, although at least one brokerage has turned positive
on the sector after several months in the grip of bearish
sentiment.
Among major Chinese developers listed in Hong Kong, China
Overseas Land & Investment Ltd. (CAOVY) shrank 4%, Shimao
Property Holdings Ltd. (0813.HK) dropped 4.2%, China Resources Land
Ltd. (1109.HK) gave up 3.5%, Guangzhou R&F Properties Co.
(GZUHY) slid 3.4%, and KWG Property Holding Ltd. (1813.HK) slipped
1.9%.
In Shanghai trading, shares of Gemdale Corp. tumbled 4%, Cinda
Real Estate Co. shed 3%, and Poly Real Estate Group Co. sank
4%.
The decline came after a Chinese official Monday denied a China
Times report that Beijing would delay the implementation of a new
property tax. The report had been widely cited as a reason for a
jump in property shares in Shanghai and Hong Kong on Monday.
Nevertheless, analysts at UOB Kay Hian wrote in a report
released Tuesday that they have now turned positive on the Chinese
property sector since their initial downgrade in August, when it
first became clear that Beijing would act to cool soaring housing
prices.
UOB analysts Sylvia Wong and Johnson Hu upgraded seven Chinese
property stocks, adding they were now upbeat on the sector because
of "diminishing policy noise," cheap valuations and concerns over
Europe.
"While it still remains uncertain whether a property tax will be
introduced soon, there is a high chance it will not [be], because
it doesn't make sense for China to bring in another destabilizing
force to its economy when there are enough uncertainties imported
from Europe," the analysts wrote. "In any case, there is strong and
convincing evidence that the policy tone has been softening in the
last two weeks."
Earlier this month, Chinese Premier Wen Jiabao emphasized the
need to cool housing prices on the mainland, but added the
government also had to strike the right balance by supporting
economic growth. He also warned against policies that have
"negative consequences."
UOB's analysts said that while they couldn't know whether the
stock markets have hit a bottom, "we are satisfied that the
[property] sector will perform at least in line with the overall
market from here," adding it was likely a good time for investors
with a medium- to long-term horizon to accumulate property sector
shares.
"The European Union's debt problem could turn out to be a
blessing in disguise, at least in the near term. ... While we don't
expect a liquidity boost like the one we saw in 2008, given the
inflation concern, as long as Europe's problems persist, we expect
the central government will lend a helping hand when necessary,"
they said.
Hong Kong weighed by auction
Hong Kong property shares also declined, adding to the selling
pressure after a government land auction in the city the previous
day failed to spark buying interest.
Although demand wasn't as muted as in another auction in the
city recently, the winning bid of 1.33 billion Hong Kong dollars
($171 million) from Hong Kong Ferry Holdings Co. for a residential
property site in the city's Fanling area had fallen short of
expectations.
"We believe the auction outcome reflects a view on the part of
developers that Hong Kong physical property prices may be
range-bound in the next [one to two years], but no major correction
is likely," Merrill Lynch wrote in a note to clients, adding they
expect prices to "consolidate by 5%" in the near term and remain
flat on a year-on-year basis by the end of 2011.
"We expect a standoff in the physical market to continue, driven
by good economic growth, limited supply near-term and low interest
rates on the positive side, but rising supply medium-term and
worsening affordability on the negative side," they said.
Shares of HK Ferry lost 3.3% by noon in Hong Kong, with Sun Hung
Kai Properties Ltd. (SUHJY) sliding 3.6%, Sino Land Co. (SNLAY)
falling 4%, and Cheung Kong Holdings Ltd. (CHEUY) shrinking
2.7%.
In wider markets activity, Hong Kong's Hang Seng Index dropped
2.6%, China's Shanghai Composite fell 1.2%, Japan's Nikkei 225
tumbled 3%, South Korea's Kospi plunged 4.1% and Australia's
S&P/ASX 200 lost 2.3%.