China's New Property Investment Regulations Rock Real Estate Stocks


Shares in Asia closed mostly lower Tuesday. China's Shanghai Composite Index fell 2.1% to 2,908 and Hong Kong's Hang Seng slid 1.5% to 21,262. In Japan the Nikkei 225 Index inched up 0.4% to 11,213.

China's new restrictions on property investments are certainly cooling the market. Worried about a giant housing bubble, the authorities have stepped up measures to curb speculation, including introducing tougher requirements for buyers to prove they actually live in the cities in which they are buying, raising minimum down payments and preventing banks from lending for third home purchases. According to Newsweek, the government has also made local officials responsible for stabilizing prices. According to The Wall Street Journal's MarketWatch, it's not uncommon for Chinese to spend 50 to 100 times their annual salaries to buy a home, and in places like Haikou, a palm tree-covered island in Hainan where prices have skyrocketed, 95% of home sales are made to out-of-towners.

Some estimate that real estate and building-related business represents as much as 60% of the country's GDP, says Newsweek. Today major Chinese developer Poly Real Estate sank 1.7% and China Vanke dropped 1.3%. Gemdale, meanwhile, climbed 3.6%. Last week Gemdale reported a 21-fold increase in first quarter net income from a year earlier, according to Bloomberg Business Week.

In Hong Kong, real estate investors also had the jitters and companies with projects in China tumbled. Hang Lung Properties sank 2.7% and Sino Land fell 2.2%. Henderson Land, which sells high-end properties in Hong Kong sank 3% and Cheung Kong dipped 0.7%.

Hong Kong lenders also closed lower today with Bank of Communications plummeting 1.6%, China Construction Bank losing 1.5% and Bank of China falling 1%.

One bright spot on Hong Kong's big board was China Unicom, which surged 3.1%. The company provides telecommunication services in China, including Internet services.

In Japan Fanuc, a maker of robots for factories soared 11% and IHI Corp., which makes heavy machinery rallied 9.3%. Electronics makers also climbed higher with Konica Minolta rocketing up 7.5%, Sony gaining 3.2%, Mitsubishi Electric rising 2.5% and Sharp advancing 2%.

Japanese carmakers fared well today with Hino, maker of diesel buses and trucks, adding 4.8% to yesterday gains, Mazda climbing 1.4%, Honda rising 0.8% and Toyota eking out a 0.1% rise. But the shippers that carry Japan's exports out to the rest of the world lost value today. Mitsui OSK Lines fell 3% and Kawasaki Kisen Kaisha, which operates both passenger lines and cargo ships that carry everything from cars, to grain and iron ore, sank 1.3%. While the Nikkei heads higher, China is giving back some of its extraordinary gains.