China's CSI300 in biggest loss since Nov 2010 on property curbs, HK sinks

Mon Mar 4, 2013 4:11am EST

* HSI -1.5 pct, H-shares -2.1 pct, CSI300 -4.6 pct

* CSI300 suffer heaviest loss in more than 2 years

* Vanke, Poly Real Estate down maximum 10 pct

* Beijing's move will "freeze" property market near term: UBS

* HSBC slips ahead of 2012 earnings, profit disappoints

By Clement Tan

HONG KONG, March 4 (Reuters) - Hong Kong and China shares slumped on Monday, with the CSI300 suffering its heaviest single day loss in 28 months after Beijing hit property developers with more tightening measures to contain housing costs that were harsher than expected.

The announcement from China's cabinet late on Friday involved a stricter implementation of a 20 percent capital gains tax on existing home sales, strengthening home-purchase curbs and increasing loan rates for buyers of second homes in cities where prices are rising too quickly.

The CSI300 of the top Shanghai and Shenzhen A-share listings closed down 4.6 percent, its worst daily showing since November 2010. The Shanghai Composite Index dived 3.7 percent in the heaviest bourse volume in a month.

The Hang Seng Index ended down 1.5 percent at 22,537.8, just above last Tuesday's two-month closing low. The China Enterprises Index of the top Chinese listings in Hong Kong sank 2.1 percent.

"Friday evening's announcement was very significant and beyond the expectation of many in the market," said Hong Hao, chief equity strategist at Bank of Communication International Securities.

"We are in a high risk zone now. I wouldn't advise clients to add risk in the near term, since property is a huge sector. This will have a ripple effect on other sectors in the economy," Hong added.

China's two largest developers by sales, Shenzhen-listed China Vanke and Shanghai-listed Poly Real Estate each plunged by the maximum 10 percent limit. The Shanghai property sub-index plummeted 9.3 percent, its worst single day showing since June 2008.

In Hong Kong, China Resources Land slumped 8.9 percent, reversing losses on the year. It is now down 2.4 percent in 2013, compared with a 0.5 percent loss on the Hang Seng Index and 2.9 percent slide on the China Enterprises Index.

China State Construction Engineering, the country's largest construction contractor, tumbled 9.7 percent in Shanghai. Anhui Conch Cement , China's largest cement producer, slumped the maximum 10 percent in Shanghai and 4.8 percent in Hong Kong.

UBS downgraded their target prices by an average of 13 percent for 12 Hong Kong-listed Chinese developers they cover, expecting new measures to "freeze" the entire market and delay the originally planned sales schedules in the near term.

In the bond market, Chinese property bonds are down by 50 cents to a point lower in early deals with analyst watching if local governments will follow up with their own measures.

China's property market has been rife with speculation about rising house prices and what the country's new leadership may do to curb them in the lead up to this week's annual parliamentary meetings.

The annual Chinese People's Political Consultative Conference began on Sunday and the National People's Congress, where Xi Jinping is expected to be confirmed as president, starts in Beijing on Tuesday.

UBS DOWNGRADES CHINA BANKS

Chinese banks were also key sources of weakness after UBS lowered price targets for the sector's Hong Kong listings by 3 to 16 percent and downgraded Agricultural Bank of China (AgBank) from "neutral" to "sell" and Bank of China (BoC) from "buy" to "neutral".

"We believe record high credit expansion in January will trigger earlier-than-expected credit tightening in the second quarter of 2013," UBS analysts said in a note dated March 1, which also flagged rising risks from shadow banking.

AgBank shares shed 2.5 percent in Hong Kong and 3.4 percent in Shanghai. BoC shares sank 2 percent in Hong Kong and 1.7 percent in Shanghai.

HSBC Holdings slipped 1.2 percent ahead of its 2012 full-year corporate earnings. Up 3.6 percent on the year, it is currently trading at a 40 percent discount to its forward 12-month price-to-book multiple, according to Thomson Reuters StarMine.

After market close on Monday, HSBC Holdings posted a near $21 billion pre-tax profit for last year, falling short of expectations but pledged to increase its dividend next year as strong growth in Hong Kong and other core Asian markets boost its capital.

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