Real estate gains look fragile without details of tax reform
With news that the government is to reform property taxes having just seeped out, real estate shares started the morning with steep falls as expected.
China Vanke Co., Ltd. (SZ:000002), for example, opened 2.3 percent down after falling 7.3 percent last week. It then continued to drop by 3.21 percent.
The introduction of a property tax would seem to indicate a strong intention to bring down bubbling property prices and stimulate sales of currently unsold inventories. More details are expected to follow in the coming days.
So it was a surprise to see that down in Hong Kong real estate shares got out of completely the other side of the bed, rising sharply at the start of the session. Cheung Kong (Holdings) Limited(HK:0001), for example, was up 4 percent 20 minutes after the start of trading.
This was thanks to weekend newspaper reports of foreign investment banks singing bullish praises for the Chinese property market.
UBS said that the mainland real estate investment market would see a strong recovery in the second half of the in 2009, predicting that middle and lower-end housing contruction will resume growth at a high pace.
China chairman at JP Morgan Chase, Li Jing, said that the real estate market was “substantially warming back up”.
Citibank predicted that the Bohai Sea area, western China, Shanghai and central Beijing will rise 5 percent.
While Goldman Sachs real estate unit rating will be revised upward to neutral from cautious.
And under the influence of Hong Kong market, Shanghai real estate stocks soon followed suit. At 10:20, Vanke suddenly went from from 2 percent down to percent up, eventually closing up 3.21 percent
It remains to be seen whether the details of China’s new property tax will correct both these gains and the bullish predictions for China’s real estate sector this year.
Poly Real Estate Group Co.(SH:600048), the second largest developor, climbed 1.54 percent. COFCO Property (Group) Co. (SZ:000031) surged to the 10 percent trading limit.
Guangzhou R&F Properties Co. (HK:2777), the biggest real-estate company in the southern Chinese city, surged 6.28 percent. Sun Hung Kai Properties Ltd. (HK:0016) gained 5.82 percent. Henderson Land (HK:0012), the Hong Kong-based builder controlled by billionaire Lee Shau-kee, jumped 5.53 percent.
Sino Land Co. (HK:0083), owner of one of Hong Kong's tallest buildings, surged 9.2 percent. New World Development Co.(HK:0017), controlled by Hong Kong billionaire Cheng Yu-tung, rose 7.98 percent.
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