Longfor, KWG shares firmer despite Jan sales slump

HONG KONG (Feb 9): China home builders Longfor Properties Co Ltd and KWG Property Holding Ltd found investor favour on Thursday despite reporting hefty declines in January sales, as investors moved into Chinese property stocks amid easier borrowing conditions for China home buyers.

Chinese property listings in Hong Kong, as well as mainland cement companies and building-materials suppliers, gained ground after the People's Bank of China on Tuesday said banks must lend money to first-time homebuyers in China. The first clear sign of support for mortgage lending after two years of austerity measures in China.

Longfor Properties, the country's sixth-largest developer by sales, said on Thursday that contract sales in January totalled 1.18 billion yuan (RM563.53 million), down 72.3% from a year earlier. It focuses on development in the southwestern cities of Chengdu and Chongqing, as well as Beijing. It narrowly missed its sales target of 40 billion yuan last year.

KWG, a smaller player that focuses on the southern city of Guangzhou, said January sales were 405 million yuan, down 68.8% from January 2011.

Longfor shares were up 4.3% at the midday trading break in Hong Kong. KWG was up 9.1%.

Seasonal factors contributed to the sales declines, with the Lunar New Year, a slow time for sales, falling in January this year and February last year. China Vanke Co Ltd, the market leader by sales value, also posted a decline in January.

Fund managers said they were moving money out of defensive plays such as property trusts and into home developers listed in Hong Kong, a more speculative investment play, as China shifts from two years of austerity measures to a more accommodative stance.

Home prices in China have fallen for five straight months, according to a private survey.. Although Chinese Premier Wen Jiabao has said he wants to see a reasonable pull-back in home prices in 2012, there are signs of a policy shift. Borrowing is getting easier, with banks offering mortgages at or below the standard rate in China, now at 7.05%, instead of the interest-rate premium they demanded in 2011.

One property analyst, who did not want to be identified because he is not authorised to speak to the media, said weaker home builders were likely to see the biggest bounce in their share prices after the central bank's move, since any policy-easing would suggest easing pressure for company's facing balance-sheet issues.

Greentown China Holdings Ltd, which has been selling off developments to bolster its balance sheet, was up 8.25%, following a 15.9% gain on Wednesday.

Kaisa Group Holdings Ltd was up 9.9% after announcing a management reshuffle. It said on Monday that January sales rose 40% from a year earlier. — Reuters