Friday, March 19, 2010

Beijing Clamps Down On MDICs

This made the earlier article on "China's Bubble Doomsdaysayers" look intelligent. At least Beijing is on the right path, clamp down on the state owned enterprises dabbling in real estate.
Friday, March 19, 2010

Beijing has banned 78 state-owned enterprises from dealing in the property market in a determined move to curb home prices.

The directive from the State-owned Assets Supervision and Administration Commission yesterday said only 16 state-owned companies whose primary business is real estate will be allowed to participate in the sector.

Analysts say the move will have a negative impact on the stock market and create correction pressure on mainland developers across the board.

"The recent steps and comments from Beijing and state-run media show the central government is not happy with the SOEs' recent high-profile participation in land auctions, which have drawn heavy criticism," Quam Securities sales director Andrew Wong Wai- hong said.

"The recent bidding of record prices for Beijing sites by SOEs was a slap in the face for Premier Wen Jiabao who has reiterated in the national legislative meetings that curbing property prices is one of his main tasks this year."

Wong said the SASAC's message is clear - Beijing is firm in its intention to cool the overheated real estate sector.

"The bullish sentiment [on mainland property] will turn sour after the SASAC announcement," Wong said.

On Monday, state-backed Sino- Ocean Land made a 4.08 billion yuan (HK$4.64 billion) winning bid for a site in Beijing's Chaoyang district, while China South Industries Group bid 1.76 billion yuan for a Haidian district site.

That was followed by Poly Group's 5 billion yuan winning bid on Wednesday for another Chaoyang site.

The back-to-back biddings triggered a lot of public criticism.

State-run media, including the People's Daily and China Central Television, criticized the SOEs for not fulfilling their social duties and pushing home prices higher instead.

"SOEs should follow Beijing's lead in curbing the heated property market," a People's Daily editorial said.

SASAC said the 16 companies still in the property fray include China State Construction (3311), China National Real Estate Development, China Poly Group, China Railway Construction (1186) and Sinochem Corporation.

The list also includes China Travel Services Holdings, China Merchants Group, China Resources (Holdings) and Nam Kwong Group Limited.

"Subsidiaries of state-owned companies that are currently in an adjustment phase should accelerate their pace and make an orderly withdrawal from the market after completing current projects," SASAC spokesman Du Yuanquan said.

Wong at Quam Securities said even though no cut-off date has been set and the 78 firms concerned allowed to continue till the completion of current projects, it is understood each developer will not be able to hoard land for more than two years. So it will still act as a firm cooling measure.

Last month, People's Bank of China and the Banking Regulatory Commission banned financial institutions from lending money to developers who hoard land in a bid to push up prices.

p/s photos: Miyazaki Aoi

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