Cap­i­tal flows mov­ing from real es­tate

Lim­its on prop­erty pur­chases re­di­rect funds to A-shares

China Daily (USA) - - BUSINESS - ByWUYIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

Lim­its on res­i­den­tial prop­erty pur­chases are driv­ing cap­i­tal flows into stocks, re­sult­ing in im­me­di­ate, short-term in­creases in stock prices in China’s A-share mar­ket, an­a­lysts said onMon­day.

As many as 20 cities have pushed up their thresh­olds for home pur­chases, in­clud­ing set­ting higher down pay­ment re­quire­ments and nar­row­ing the def­i­ni­tion of qual­i­fied buy­ers. More cities are on their way to in­tro­duce sim­i­lar mea­sures to curb fast growth of av­er­age hous­ing prices and to limit spec­u­la­tive buy­ing.

Li Xun­lei, an econ­o­mist with Haitong Se­cu­ri­ties, said that the mea­sures against spec­u­la­tive buy­ing aimed to delever­age the prop­erty mar­ket.

“A part of the cap­i­tal with­drawn from the prop­erty mar­ket will go to the stock mar­ket, which has in­vestors with more tol­er­ance for risks and more liq­uid­ity,” said Li.

Qiao Yongyuan, an an­a­lyst with Guo­tai Jun’an Se­cu­ri­ties, said that it was a nat­u­ral re­sult for cap­i­tal own­ers to di­vert money from one mar­ket to another when pol­icy mak­ers were cool­ing down the over­heated prop­erty mar­ket and the stock mar­ket was on track for re­cov­ery.

How­ever, the im­pact would not last long be­cause the en­tire size of cap­i­tal flows from prop­erty to stocks was lim­ited due to the low liq­uid­ity of the prop­erty mar­ket, Qiao added.

Also, the stock mar­ket still had un­cer­tain­ties due to fluc­tu­at­ing cur­rency ex­change con­di­tions.

Stricter poli­cies over the real-es­tate mar­ket will also put pres­sure on the per­for­mances of A-share listed de­vel­op­ers, ac­cord­ing to a CITIC Se­cu­ri­ties strat­egy re­port.

A part of the cap­i­tal with­drawn from the prop­erty mar­ket will go to the stock mar­ket...” an econ­o­mist with Haitong Se­cu­ri­ties

Li Xun­lei,

Mao Liyuan, a 48-year-old Shang­hai in­vestor who sold her 85-square-me­ter apart­ment for 5.1 mil­lion yuan ($761,100) in Septem­ber, said she will put about just one mil­lion into the stock mar­ket and put the rest in wealth man­age­ment prod­ucts and gold to di­ver­sify risks.

“You have to take a lot of stock mar­ket risks into con­sid­er­a­tion. For in­vestors, the prop­erty and stock mar­kets are not the only op­tions,” she said.

The A-share mar­ket closed onMon­day with gains in both Shang­hai and Shen­zhen. The Shang­hai Com­pos­ite In­dex gained 1.45 per­cent to 3,048 points and the Shen­zhen Com­po­nent In­dex gained 1.65 per­cent to 10,471 points.

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