China Stocks Fall to 20-Month Low, Led by Property Developers

By Chua Kong Ho

Sept. 8 (Bloomberg) -- Chinese stocks fell, driving the benchmark index to a 20-month low, as property companies dropped on concern slowing demand has forced developers to cut prices.

China Vanke Co., the nation's largest real-estate company, declined 5.7 percent after Shanghai Securities News said the company lowered prices in Hangzhou. China Petroleum & Chemical Corp., the nation's largest oil refiner, sank 7.6 percent after the company's president said the parent will delay some projects to reduce spending. Bank of China Ltd., which held $7.5 billion of debt issued by Fannie Mae and Freddie Mac, gained 1.2 percent after the U.S. government took over the two home-loan providers.

The CSI 300 Index, which tracks yuan-denominated shares in Shanghai and Shenzhen, lost 56.91, or 2.6 percent, to 2,126.52 at the close. Shares in China fell even as regional stocks rallied, driving the benchmark MSCI Asia Pacific index up 4.4 percent. The measure had the biggest gain in more than seven months on speculation the U.S. government's action will boost confidence in financial markets.

``There's more room for the market to fall unless substantive market-boosting policy measures are introduced,'' said Zhang Gang, an analyst at Henan-based China Central Securities Holdings Co. in a note today.

The CSI 300, the world's worst performer this year, closed at the lowest since Jan. 5, 2007. All 10 industry groups fell. The index has slid 60 percent this year on concern slowing growth is eroding profits.

Vanke dropped 5.7 percent to 6 yuan, the lowest since March 2, 2007. The Shenzhen-based company cut prices for units in four developments in the eastern Chinese city of Hangzhou, Shanghai Securities News reported today. Shanghai Industrial Development Co., a Shanghai-based property developer, plunged 10 percent to 8.33 yuan, while Poly Real Estate Group Co. slumped 9.9 percent to 12.03 yuan.

Home Prices

Shanghai's new home prices fell the most in three years in July as sales volumes declined, the Shanghai Securities News reported Sept. 5. Prices fell 24 percent in July from the previous month, the most since July 2005, while the volume of new home sales slumped almost 70 percent in both July and August from a year earlier, the report said.

``Property prices have fallen since last year and are likely to remain weak as the government hasn't eased tightening policy,'' said Tony Wang, an analyst at China Knowledge Ltd. in Chengdu. ``That's going to present difficulties for developers.''

China Petroleum, or Sinopec as the company is known, dropped 7.6 percent to 9.13 yuan, the biggest drag on the CSI 300. President Wang Tianpu said in a company newsletter today that parent China Petrochemical Corp. will deepen spending cuts this year and delay some projects as high crude prices erode earnings.

Fannie, Freddie

Bank of China gained 1.2 percent to 3.52 yuan. The nation's third-largest bank said last month it held $7.5 billion of debt issued by Fannie Mae and Freddie Mac, along with another $5.17 billion of mortgage-backed securities backed by the two companies.

The U.S. government seized control of Fannie Mae and Freddie Mac after the biggest surge in mortgage defaults in at least three decades threatened to topple the two companies.

Shandong Huatai Paper Co., a paper manufacturer, tumbled 0.97 yuan, or 10 percent, to 8.78. The securities regulator approved the company's application to sell additional shares, it said in a statement.

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