Index drops at break as property package fails to excite investors

By Pan Xiaoyi  |   2008-12-18  |     ONLINE EDITION

SHANGHAI'S key stock index closed lower in the morning session as a real estate stimulus package fell short of investors' expectations.

The Shanghai Composite Index lost 0.66 percent, or 13.14 points, to 1963.67 points at 11:30am.

The Shenzhen Composite Index, which tracks the smaller domestic market, also dropped 0.66 percent, or 3.99 points, to 603.41 points.

"The country's effort to boost a slack property market through lowering mortgage rates on purchases of a second apartment and a reduced waiting period for tax free re-sales were not strong enough to meet investors' expectations," GF Securities Co wrote in a research note. "The sluggish performance of lenders was due to speculation of another interest rate cut, which put downward pressure on the index."

Anyone who has owned a home for at least two years can now sell it without having to pay a tax. The previous waiting period for a tax-free sale was at least five years. And anyone selling a home less than two years after buying it will pay tax only on the profit, instead of the total sales price.

Poly Real Estate Group Co, China's second-largest developer by market value, retreated 2.4 percent to 17.88 yuan. Shanghai-based Shimao Property Co eased 1.9 percent to 7.21 yuan. Gemdale Corp, a Chinese partner of ING Group NV, slumped 2.88 percent to end at 8.1 yuan.

Airlines remained sluggish although crude oil fell below US$40 a barrel for the first time in more than four years on the New York Mercantile Exchange.

Air China Ltd, the nation's largest overseas carrier slumped 1.98 percent to 4.45 yuan. China Southern Airlines Co, the nation's biggest airline by fleet size, plunged 2.21 percent to 3.41 yuan. China Eastern Airlines Corp, the third-largest by fleet size, inched down 0.24 percent to 4.20 yuan.

Shanghai Airlines Co, the city's second-largest carrier, said it needs a capital injection from shareholders and is studying related issues. The stock jumped 1.49 percent to end the session at 4.77 yuan.

Elsewhere, China may allow its steel makers to export without the need for permits as domestic demand and prices fall. Baoshan Iron & Steel Co, China's biggest steel maker, fell 1.33 percent to 5.18 yuan. Angang Steel Co, the second-largest, dipped 0.65 yuan to 7.6 yuan. Wuhan Iron & Steel Co, the third-largest, tumbled 2.3 percent to 5.94 yuan.