China stocks rose, led by property shares. The Shanghai Comprehensive Index climbed 0.56 percent to 2338.42, while the Hang Seng Index rose 3.44 percent, to 13910.34.
HSBC (HK:0005) gained 9.83 percent, rising to HK$45.85 after the US unveiled plans to clean up banks’ distressed assets.
Cement and construction shares also advanced, while property shares gained on the back of apparent changes to China’s land laws being planned. Shui On Construction and Materials (HK:0983) surged by 13.19 percent, while Hebei Taihang Cement Co (SH:600553) rose to the 10 percent trading cap.
Reports of land law changes spur property rise
The Huaxia Times reported that an upcoming revision of China’s Land Management Law has been completed, with a new “use rights renewal” provision that may influence the property market.
In the Land Management Law published in 2008, the right to use of land for 70 years can be renewed "free of charge". However according to the Huaxia Times, in the draft revision of this law that is currently being planned, the words "free of charge" have been removed. If renewals of land use rights are not free, there will be some accumulated depreciation in the value of second-hand houses.
Despite the fact this will bring down the value of all houses, it will, in the short run make newly constructive houses much more attractive than second-hand homes, thus providing a boost to developers. And the common practices of hoarding of land and apartments which do not sell at the developers desired price is expected to become rarer, as the 70 year period will now begin when the land is acquired rather than when the property is sold.
Property shares advanced for a second day on the news. Mainland real estate shares gained 1.95 percent on average, while the Hang Seng Property Index rose 3.67 percent.
New World China Land (HK:0917), a property developer and investor focusing on the mainland market, climbed 11.84 percent. Shimao Property Holdings Ltd (HK:0813), the Chinese developer controlled by billionaire Xu Rongmao, rose 9.9 percent, while Hang Lung Properties Ltd (HK:0101), 14 percent of whose sales are in mainland China, climbed 8.44 percent.
Hainan Pearl River Holdings Co (SZ:000505), a developer in southern China, surged to the 10 percent trading cap, and Poly Real Estate Group Co (SH:600048), China’s second largest listed developer, gained 1.06 percent.