* HSI -1.3 pct, H-shares -2 pct, CSI300 -3.8 pct
* CSI300 set for worst daily loss since January 2011
* Vanke, Poly Real Estate A-shares down maximum 10 pct
* Beijing's move will "freeze" property market near term:
* HSBC slips ahead of 2012 full-year earnings
By Clement Tan
HONG KONG, March 4 Hong Kong and China shares
fell sharply on Monday, with the CSI300 set for its worst day in
two years after Beijing hit property developers with more
tightening measures to contain housing costs that were harsher
The State Council had demanded late on Friday an increase in
required down payments and loan rates for buyers of second homes
in cities where prices are rising too quickly. The announcement
came ahead of the start of China's annual parliamentary
At the midday trading break, the CSI300 of the top
Shanghai and Shenzhen A-share listings was down 3.8 percent, set
for its worst daily showing since January 2011. The Shanghai
Composite Index dived 2.9 percent in heavy midday
The Hang Seng Index shed 1.3 percent to 22,582.9,
while the China Enterprises Index of the top Chinese
listings in Hong Kong sank 2 percent. Midday bourse turnover was
at its heaviest since Feb. 5.
"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
"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,"
China's two largest developers by sales, Shenzhen-listed
China Vanke and Shanghai-listed Poly Real Estate
each dived by the maximum 10 percent limit. The
Shanghai property sub-index was down 9.1 percent, poised
for its worst daily loss since June 2008.
In Hong Kong, China Resources Land slumped 8
percent, reversing losses on the year. It is now down 1.7
percent in 2013, compared with a 0.3 percent loss on the Hang
Seng Index and 2.7 percent slide on the China Enterprises Index.
China State Construction Engineering, the
country's largest construction contractor, tumbled 9.1 percent
in Shanghai. Anhui Conch Cement , China's
largest cement producer, slumped 9.5 percent in Shanghai and 5.3
percent in Hong Kong.
The move to tighten on Friday evening also involved an
extension of home purchase restrictions to cover all districts
and all product types and stricter enforcement of a 20 percent
capital gains tax on property sales.
Lee Wee-Liat, BNP Paribas' head of Asia property research,
said in a note dated March 3 that he expects the announcement on
the expansion of property taxes to more cities in April.
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
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 were down 1.8 percent in Hong Kong
and 3.4 percent in Shanghai. BoC shares each sank
1.7 percent in Hong Kong and Shanghai.
HSBC Holdings slipped 0.8 percent ahead of
its 2012 full-year corporate earnings due after market close on
Monday. Up 4.1 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.
In the last 30 days, 5 of 18 analysts downgraded their
full-year 2012 earnings-per-share estimates for HSBC by an
average of 4.4 percent.