Chanos says China’s real es­tate boom con­tin­ues ‘un­abated’

The Pak Banker - - Company& -

SHANG­HAI: China's prop­erty boom con­tin­ues "un­abated" and has even picked up since the govern­ment en­acted poli­cies to cool spec­u­la­tion, said Jim Chanos, the hedge-fund man­ager who pre­dicted the mar­ket may crash as early as 2010.

Home prices in 70 Chi­nese cities climbed 7.7 per­cent in Novem­ber from a year ear­lier, even af­ter the govern­ment sus­pended mort­gages for third-home pur­chases and pledged to in­tro­duce a prop­erty tax. Sales vol­ume jumped 14.5 per­cent.

"A lot of reg­u­la­tions in China, they are de­signed to be skirted," Chanos said in an in­ter­view with Carol Mas­sar and Matt Miller on Bloomberg Tele­vi­sion's Street Smart pro­gram. "The boom has con­tin­ued to be un­abated. It's ac­tu­ally even picked up a lit­tle bit re­cently to­wards the end of year."

Chanos re­peated his view that China is on a "tread­mill to hell" be­cause of the coun­try's re­liance on prop­erty devel­op­ment for eco­nomic growth. Mil­lions of apart­ments re­main empty in the nation as spec­u­la­tors dom­i­nate the mar­ket, said Chanos, who also de­scribed China's prop­erty bub­ble as "Dubai times 1,000."

China's cen­tral

bank raised bank re­serve re­quire­ments on Dec. 10 for the third time in five weeks to tame in­fla­tion and re­strain for­eign cap­i­tal, and in­creased in­ter­est rates for the first time in three years in Oc­to­ber.

A gauge track­ing prop­erty stocks on the Shang­hai Com­pos­ite In­dex fell 0.6 per­cent to a one-week low at the 3 p.m. close. China Vanke Co. dropped 0.4 per­cent on the Shen­zhen ex­change, while Poly Real Es­tate Group Co. de­clined 0.6 per­cent in Shang­hai.

While the year-on-year ad­vance in Novem­ber prop­erty prices was the slow­est in a year, val­ues in­creased for an 18th straight month, ac­cord­ing to govern­ment data.

China Vanke, the nation's biggest pub­licly traded de­vel­oper, said ear­lier this month it be­came the first Chi­nese de­vel­oper to post an­nual sales of 100 bil­lion yuan ($15 bil­lion), reach­ing a tar­get it had set for 2014 and de­fy­ing govern­ment mea­sures to cool the real-es­tate mar­ket.

Chanos, who was one of the first in­vestors to fore­see the 2001 col­lapse of Hous­ton­based en­ergy com­pany En­ron Corp., said some Chi­nese de­vel­op­ers are get­ting more lever­aged and are tak­ing more money from in­ter­na­tional in­vestors, pro­vid­ing op­por­tu­ni­ties for hedge funds. He didn't name spe­cific stocks.

"They all look very in­ter­est­ing from a short-sell­ers per­spec­tive," said Chanos, founder of Kynikos As­so­ci­ates LP. "The western in­vestor is the one who's go­ing to end up hold­ing the real es­tate bag here."

Some bro­ker­ages re­mained up­beat about China's real es­tate mar­ket. Cit­i­group Inc. said this week the coun­try's plan to boost so­cial wel­fare hous­ing should be pos­i­tive for real es­tate as the govern­ment will want a "sta­ble" prop­erty mar­ket, and it main­tained its "bullish view."

Chanos's view is "a lit­tle ex­treme," Glenn Rufrano, pres­i­dent and chief ex­ec­u­tive of­fi­cer of Cush­man & Wake­field Inc., the world's largest pri­vately held real es­tate ser­vices com­pany, said in a Bloomberg Tele­vi­sion in­ter­view. "The econ­omy is grow­ing and has been grow­ing and the real es­tate mar­ket is in­creas­ing in value. The govern­ment knows this and they are get­ting ahead of it."

Join­ing Vanke, Shang­hai Forte Land Co. said this month its sales vol­ume reached 12.6 bil­lion yuan by Novem­ber, ex­ceed­ing its an­nual rev­enue tar­get of 11.5 bil­lion. Shi­mao Prop­erty Hold­ings Ltd. said it achieved 91 per­cent of this year's 30 bil­lion yuan sales tar­get by the end of last month.

China's prop­erty stocks have fallen fol­low­ing the govern­ment's poli­cies. The gauge of prop­erty stocks lost 26 per­cent this year, more than twice the de­cline on the bench­mark mea­sure and the most among five in­dus­try groups.

The Chi­nese govern­ment won't loosen mea­sures aimed at curb­ing real es­tate prices next year be­cause of the con­tin­u­ing risk of a bub­ble, Vanke Chair­man Wang Shi said, Reuters re­ported yes­ter­day. The mea­sures have made some progress and mod­er­at­ing the pace of prop­erty gains would be an achieve­ment, Wang said, the re­port said.

China will strengthen the con­trols on the real es­tate mar­ket and curb spec­u­la­tive in­vest­ment from next year through 2015, Xin­hua News Agency re­ported to­day, cit­ing China's Min­istry of Hous­ing and Ur­ban-Ru­ral Devel­op­ment.

More­over, Sara Lee Corp. rose 5.3%, the most in two months, af­ter the Wall Street Jour­nal re­ported that the maker of Jimmy Dean break­fast foods and Ball Park hot­dogs may sell it­self to Brazil­ian meat pro­ces­sor JBS SA.

JBS, the world's largest meat-pro­cess­ing com­pany, made over­tures to the Down­ers Grove, Illi­nois-based com­pany and talks have been on and off for months, the news­pa­per said, cit­ing uniden­ti­fied peo­ple fa­mil­iar with the mat­ter. Sara Lee also may seek to sell its bev­er­age and meat units, the WSJ said.

Sara Lee, whose sales sur­passed $10 bil­lion last year, is sell­ing other di­vi­sions, such as its North Amer­i­can bak­ery unit, to con­cen­trate on the faster-grow­ing cof­fee and meats busi­nesses. In­terim Chief Ex­ec­u­tive Of­fi­cer Mar­cel Smits has led the com­pany since Brenda Barnes re­signed four months ago to fo­cus on her health.

Mike Cum­mins, a spokesman for Sara Lee, didn't im­me­di­ately re­spond to a request for com­ment. An email to the in­vestor re­la­tions di­rec­tor at Sao Paulo-based JBS wasn't im­me­di­ately re­turned.

Sara Lee rose 87 cents to $17.26 at 4 p.m. in New York Stock Ex­change com­pos­ite trad­ing. The gain was the most since Oct. 4. JBS rose 1.5 per­cent to 7 reais. Based on to­day's trad­ing, Sara Lee had a mar­ket value of about $11 bil­lion. -Bloomberg

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