Chinese Property Shares Tumble on Third-Home Mortgage Speculation

Markets closed lower in Asia Tuesday. In China the Shanghai Composite Index fell 1.6% to 2,450 and in Hong Kong the Heng Seng Index dipped 0.2% to 20,431. Japan's Nikkei 225 Index inched 0.1% lower, ending the day at 9,537.

Chinese property investors' hopes were dashed today when the government quashed rumors that real estate curbs will be loosened and that restrictions on banks granting mortgages for third homes could soon be relaxed. Rumors are still swirling with China Daily headlines like, "Third-home mortgages back in some big cities." The paper reports, "After banks in Shanghai, Nanjing and Hangzhou started to give out loans, their counterparts in Beijing and Shenzhen also reopened the business to lend money to those who wish to buy a third home." There are reports that these loans require a down payment of 50% or more and have exorbitant interest rates.

But according to, the Chinese banking regulator insists there was never any break in the policy restricting the number of home purchases allowed, reporting that a statement from authorities said, "Commercial banks need to carry out current policies strictly." And Bloomberg also reports that, "The Ministry of Housing and Urban-Rural Development reiterated that it will maintain curbs on speculative purchases and increase market supply," countering recent media reports.

This was bad news for property developers, who've made a bundle off property speculators. Today Poly Real Estate plunged 4.3%, Gemdale tumbled 4% and China Vanke slumped 2.4%.

In other sectors Zijin Mining Group sank 3.7%, after a waste water leak from a copper mine contaminated a nearby river killing millions of fish, according to Reuters. Other mining companies were also down with Shandong Gold Mining losing 2.9%, Baoshan Iron & Steel falling 2.8% and Maanshan Iron & Steel declining 1.8%. Meanwhile, Pingdingshan Tianan Coal Mining rose 2.8%.

In Hong Kong the damage to Zijin's share price was even worse, with the stock plunging 12.2%. According to China Daily, not only has the mining company had to shut down its biggest mine, but it could also have to pay fines and compensate local fisheries.

Shares in Hong Kong-listed airlines climbed today with Air China soaring 3%, China Eastern Airlines jumping 2.9% and China Southern Airlines rising 1.5%.

In Japan, steelmakers lost value with Nippon Steel sliding 2.3% and Kobe Steel dipping 0.6%.

A rise in the value of the yen clobbered Fanuc, an industrial robot maker heavily dependent on overseas sales. Today it dropped 2.1%. But consumer electronics companies held their own with Pioneer rising 3.2%, Sharp adding 0.9% and Sony advancing 0.6%.

Shares in Japan Tobacco slumped 2.1% and peddlers of alcoholic beverages also fell. Sapporo Holdings and Asahi Breweries were both down 1.8% for the day. More proof that the Japanese are looking for ways to cut back on unnecessary spending.