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