Chinese real estate stocks posted large losses Wednesday after the government decided to take further actions against speculative property transactions.
Declines in the property and bank sectors dragged down the market as a whole, with the key Shanghai Composite Index, which includes A and B shares, down 1.54 percent, or 79.53 points, to close at 5,095.54 points, after touching an intra-day low of 5,054.57 points.
The Shenzhen Component Index on the smaller Shenzhen Stock Exchange ended at 16,831.57 points, down 1.21 percent, or 205.34 points.
Investors dumped property stocks after the People's Bank of China (PBOC) and China Banking Regulatory Commission (CBRC) said in a notice Tuesday that commercial banks should define a "second home" by considering property owned by the families of mortgage applicants as a group, rather than the applicant alone.
The move was aimed at cracking down on property speculators buying through mortgages. An applicant of mortgages for "second home" is required to have a down payment of at least 40 percent and pay a 10-percent premium on their interest payments.
Vanke, China's leading developer, fell 4.02 percent to 31 yuan (about 4.25 U.S. dollars), Poly Real Estate dropped 4.64 percent to 65.54 yuan, and Gemdale, another major developer, fell 7.3 percent to 43.54 yuan.
Banks were weak as well, since the new definition of a "second home" would force them to cut back on their most lucrative housing loans. There were also worries about new interest rate hikes.
Shares of ICBC fell 0.73 percent, Bank of China dropped 1.20 percent, the Fujian-based Industrial Bank plummeted 6.50 percent and Shanghai Pudong Development Bank slumped 5.90 percent.
Wan Bing, an analyst with Guangfa Securities, said the sharp overnight decline on Wall Street also dampened investor sentiment here.
Overnight, the Dow Jones Industrial Average fell 294.26 points, or 2.14 percent, to 13,432.77 after the Federal Reserve cut interest rates by a quarter percentage point, lower than the expected half a percentage point.
Gains outnumbered losses by 444 to 352 in Shanghai and by 356 to 279 in Shenzhen.
The combined turnover of the two bourses increased to 164.46 billion yuan from Tuesday's 160.76 billion yuan. The higher volume showed some investors had liquidated their shares to realize any profits they had made or to avoid further risks, according to the Shanghai-based SJ Stock, a consulting company.
Source: Xinhua
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