China Housing Shock: Property Shares Under Renewed Pressure After Weak Data

Chinese stocks fell sharply on Tuesday, led by a fragile-looking real estate sector, following data that showed continuing weakness in the country’s property market.

The Hang Seng Index in Hong Kong fell 1.6% on Tuesday. The iShares MSCI China ETF (NYSE:MCHI), an exchange traded fund that tracks some of China’s biggest stocks, was down 1.8% in pre-market trading in New York, despite having little exposure to the property sector.

Among the major decliners on the Hang Seng Index were Longfor Properties, down 7%, and China Resources Land, which fell 5.4%. Data on the performance of American depository receipts in Longfor Group Holdings ADR (OTCPK:LGFRY) and China Resources Land ADR (OTCPK:CRBJY) were delayed ahead of the market open in New York.

Also Read: ‘Rapid Descent’: Mortgage Rates Are Shocking Experts. Is US Housing Getting More Affordable?

Property Supply Remains High, Demand Low

Data from the China Index Academy, an independent real estate research company, showed that average daily home sales during the last week in December fell by 26% compared with the same period a year ago.

The researchers said: “The supply capacity and willingness of real estate enterprises are insufficient, and the approved listing area of commercial housing in 50 representative cities has decreased by more than 10% year-on-year.”

“Both sides of the market supply and demand weakened, the saleable area fell back but remained at a high level, and the clearance period was extended to 19.6 months. The year-on-year decline in the area of new housing starts is still large, and the year-on-year decline in the construction area continues,” the researchers added.

Weakening Manufacturing

On top of the continuing weakness in property stocks, the latest official purchasing manager survey from China’s National Bureau of Statistics showed that manufacturing in China slowed for a third-consecutive month in December, leaving the purchasing manager index (PMI) at 49, down from 49.4 in the prior month.

This contrasted, however, with PMI data from Caixin Bank, which showed the index inched up from 50.7 in November to 50.8 in December. A PMI reading below 50 indicates economic contraction.

Caixin noted, however, that employment declined significantly, while market optimism weakened on lower expectations for…