China Stocks Fall to 3-Week Low; Vanke Drops on Home Forecast

By Chua Kong Ho

Aug. 5 (Bloomberg) -- China's stocks fell to a three-week low, led by property developers and brokerages, after China Vanke Co. reduced its forecast for new homes and the value of securities transactions slumped to a 19-month low.

Vanke, the nation's largest real-estate developer, slumped to a 15-month low. Citic Securities Co., the nation's largest brokerage, declined on speculation income from trading commissions will slow. Shanghai Pudong Development Bank advanced after the Shanghai Securities News reported the central bank agreed to raise a limit on how much commercial banks can lend.

``We're somewhat cautious on the property sector as the physical market is weak,'' said James Liu, deputy chief investment officer at APS Asset Management in Shanghai, which oversees about $1 billion. ``Many people have taken a cautious stance and are watching on the sidelines.''

The CSI 300 Index, which tracks local-currency stocks traded in Shanghai and Shenzhen, lost 28.55, or 1 percent, to 2,744.60 at 1:11 p.m. local time. The gauge is set for its lowest close since July 17. About three stocks fell for each that advanced.

The benchmark index has slumped 49 percent in local currency terms this year, the second-biggest decline among 88 global indexes tracked by Bloomberg, on concern government measures to tackle inflation will erode profit and a supply of new shares will overwhelm demand.

Property Slump

Vanke declined 5.4 percent to 8.01 yuan, the second-biggest drag on the CSI 300. The stock was headed for its lowest close since April 30, 2007. The Shenzhen-based developer reduced its forecast for new-home completion to 5.86 million square meters from 6.89 million square meters, according to a company statement. Goldman, Sachs & Co. cut its price estimate by 6.9 percent.

Poly Real Estate Group, China's second-largest developer by market value, fell 5.4 percent to 14.77 yuan. Gemdale Corp., a Shenzhen-based real-estate builder, slid 3.7 percent to 7.88 yuan.

Citic Securities, the nation's largest brokerage by assets, fell 0.9 percent to 22.20 yuan. Northeast Securities Co., based in China's Liaoning province, lost 1.8 percent to 21.65 yuan. Hong Yuan Securities Co., based in Beijing, dropped 0.9 percent to 15.38 yuan.

The value of transactions on the Shanghai and Shenzhen exchanges fell to 58.5 billion yuan yesterday, the lowest since Dec. 14, 2006, according to figures from the bourses.

Pudong Bank, the Chinese partner of Citigroup Inc., gained 1.6 percent to 23.65 yuan. Bank of Beijing Co. added 1.6 percent to 12.70 yuan.

China's central bank has agreed to increase loan quotas of commercial banks by as much as 10 percent to help ease financing difficulties faced by small and medium-sized companies, the Shanghai Securities News reported, citing people it did not identify.

The Shanghai Composite Index, which measures stocks traded on the larger of the nation's two exchanges, fell 0.5 percent to 2,727.82. The Shenzhen Composite Index dropped 1.3 percent.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net