Shanghai index drops on weakness in property sector
By Ye Zhen |
August 3, 2012, Friday
|
Print Edition
Print Edition
SHANGHAI stocks ended lower yesterday, dragged down by property developers after speculation spread the government may abolish the presale system for commercial residential property.
The Shanghai Composite Index lost 0.57 percent to settle at 2,111.18 points.
Poly Real Estate led losses among developers, slumping 9.2 percent to end at 10.30 yuan (US$1.62), after speculation spread through the market that the government may introduce a pilot project in Beijing to cancel the presale system for homes.
The system allows developers to sell homes before the completion of construction. It offers developers a way to alleviate a capital shortage and reduce investment risk.
The cancellation will put developers with high debt ratios and weak financing capacity in danger of a liquidity crunch, said Wang Jianhui at Capital Securities.
Investors were spooked although analysts said the government is unlikely to abolish the presale system in the short term. Chen Xiaotian, research director at China Real Estate Information Corp, said it would be costly for the government to cancel the presale now. Canceling it would also go against the key priority of stabilizing economic growth, Chen added.
The Shanghai Composite Index lost 0.57 percent to settle at 2,111.18 points.
Poly Real Estate led losses among developers, slumping 9.2 percent to end at 10.30 yuan (US$1.62), after speculation spread through the market that the government may introduce a pilot project in Beijing to cancel the presale system for homes.
The system allows developers to sell homes before the completion of construction. It offers developers a way to alleviate a capital shortage and reduce investment risk.
The cancellation will put developers with high debt ratios and weak financing capacity in danger of a liquidity crunch, said Wang Jianhui at Capital Securities.
Investors were spooked although analysts said the government is unlikely to abolish the presale system in the short term. Chen Xiaotian, research director at China Real Estate Information Corp, said it would be costly for the government to cancel the presale now. Canceling it would also go against the key priority of stabilizing economic growth, Chen added.
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