Developers Soar in Shanghai, HK as Fears of Property Taxes Recede

Chinese construction workers
Chinese construction workers

In Asia Monday, China's Shanghai Composite Index climbed 3.5% to 2,673 and Hong Kong's Hang Seng Index added 0.6% to 19,668. In Japan the Nikkei 225 Index dipped 0.3% to 9,758.

Chinese property developers breathed a sigh of relief as an official was quoted in the China Times saying, "Taxes on holding of residential properties is impossible at least for another three years," according to China Daily.

The rumors swirling about imminent taxes, combined with restrictions on the number of homes families can own and stricter lending policies, have put a huge dent in the share prices of developers and helped drag China's major index down 18% so far this year. While the country does collect taxes on commercial properties, levying new taxes on residential properties would mean changing laws and would need approval from the central government. A process that cannot be rushed.

Today's news could rekindle the buying appetites of speculators who have been scooping up Chinese properties. Poly Real Estate surged 8.9%, Gemdale climbed 6.9% and China Vanke rose 4.2%.

Chinese suppliers of raw materials for building also got a boost, with both Baoshan Iron & Steel and Manshan Iron & Steel rising 2.6% and Anhui Conch Cement gaining 2%. Jiangxi Copper rallied 4.8% and Aluminum Corp. of China, also known as Chalco, advanced 3.7%.

The Chinese government also sent signals that it may hold off on introducing more fiscal tightening measures when an official published an article in the China Securities Journal, explaining that because of the global economic situation, China should be cautious in introducing new tightening measures, reports Bloomberg. This would bode well for property companies in Hong Kong, dependent on flush Mainland buyers willing to pay top dollar.

Today Henderson Land and New World Development both surged 2.6%, Sun Hung Kai climbed 2.2% and Hang Lung rallied 4.5%. Companies with interests on the mainland gained value with Guangzhou R&F Properties leaping 10.3%, China Resources skyrocketing 7.3% and China Overseas surging 6.1%. Soho China, a company responsible for building several landmark structures in Beijing, leaped 6.9%.

Construction-related shares also rose with China National Building Material, a major cement maker, advancing 6%.

Among other winners, China Southern Airlines soared 7% and Air China gained 6.9%.

In Japan, Sony, the maker of the PS3, shed 2.1% while rival Nintendo, maker of the Wii, advanced 2.3%. Among other electronics makers, Panasonic slid 3.1%, Sharp fell 0.8% and Pioneer lost 0.6%. But the shipping companies that transport exports from Japan to the rest of the world closed higher today. Kawasaki Kisen gained 3.9% and Mitsui O.S.K. advanced 2.6%. If the Chinese economy stays afloat, perhaps Japan will be shipping more of its high-tech goods in that direction.