Chinese Shares Surge on Prospect of Relaxed Home-Buying Restrictions


In Asia Tuesday China's Shanghai Composite climbed 2.2% to 2,529 and Hong Kong's Hang Seng rose 0.9% to 20,265. In Japan the Nikkei 225 slumped 1.1% to 9,300.

Investors piled into property stocks today on expectations that the Chinese government may begin to relax tightening measures that have cooled the markets. Analysts are predicting that the government may loosen its policies that have restricted bank loans, stemming the flow of cash that has helped the Chinese economy roar into high gear. "China will 'back away' from its tightening policies, said Donald Straszheim of International Strategy & Investment Group.

"The policy launched in April has totally demoralized both home buyers and developers with no promise of lasting benefits," Straszheim wrote in a note sent out to clients, says Bloomberg. Adding that he expects "Beijing to quietly relax their lending restrictions."

While shares in Chinese developers soared with Poly Real Estate surging 2.9% and Gemdale climbing 2%, China Daily reports that even at these lower prices, it would still take the average Beijing resident at least 25 years to buy a home. The average household income stands at $9,489 per year, according to a study by Beijing University of Technology, and an apartment costs about 25 times that.

Chinese car companies rose today, citing increased profits for the first half of the year and a steady stream of new orders. Chongqing Changan Automobile, which works with both Ford and Mazda in China, jumped 4.8% and FAW Car, Volkswagen's partner, rose 2.2%. SAIC Motor, China's biggest car manufacturer, advanced 0.8%.

It was the same story in Hong Kong, where real estate developers surged. Evergrand Real Estate Group, a builder of sprawling, self-contained luxury properties boasting shops, spas, endless gardens and swimming pools catering to the newly wealthy Chinese, skyrocketed 5.3% today while China Resources Land leaped 3.7% and China Overseas climbed 2.4%. Hang Lung and Henderson Land both advanced 1.1%. Cheung Kong was up 0.9% and Sun Hung Kai added 0.5%.

Commodity producers also rose with Zijin Mining rising 7.4% in Hong Kong and soaring to the 10% daily limit in China, despite reports from Bloomberg Businessweek that acidic waste from a mining mishap may now be spreading to the province next door. Copper and other contaminants pose a serious risk to fisheries in these waters. But investors seem to be shrewdly scooping up discounted shares in one of China's biggest gold producers. Chalco, officially named Aluminum Corp. of China, shot up 4% and Yanzhou Coal Mining gained 3.3%.

In Japan, the news was bleaker as shares followed sentiment in the U.S., where it's now looking like an economic recovery could take longer than expected. Japanese exporters lost ground with Sony plunging 2.8%, TDK declining 2.1%, Casio Computer dropping 1.8, Pioneer losing 1.6% and Canon falling 0.7%.

Japanese car companies also closed lower with Toyota plummeting 2.6%, having now received a subpoena to submit documents related to steering problems to a New York federal grand jury. Honda sank 1.8% and Mazda lost 1.5%. Japanese beer-making giant Sapporo sank 1.8%. Japanese beer consumption is falling, and on a day like today, it's easy to see why Japanese investors have little to drink to.