China property stocks face impact of realty controls

Shanghai: China's property stocks are likely to be "range-bound" in 2010 on concern that the government will step up measures to curb gains in real-estate prices, according to BNP Paribas.

The China SE Shanghai Property Index has slumped 9.7 per cent this year, after doubling last year, as the government re-imposed a sales tax on homes sold within five years of their purchase and pledged to speed up the construction of low-cost housing. The gauge rose 0.2 per cent last week as annual parliamentary meetings didn't introduce any new measures to rein in property prices.

"Some commentators are suggesting policy risks were abating," Frank Chen and Trevor Cheung, Hong Kong-based analysts at BNP Paribas, wrote in a report.

"We disagree and believe policy risks will stay with the sector for most of 2010 as the government continues to keep a tight grip on property prices."

Premier Wen Jiabao repeated a pledge in his annual report to lawmakers earlier this month to counter property speculation and "keep price levels stable". Real estate prices climbed 10.7 per cent in February from a year earlier.