April 19, 2010 (Chinavestor) Chinese stock markets fell the most in eight months as Chinese officials introduced news measures to curb lending. Banks are told not to grant loans for third homes and to applicants who can't provide tax returns or social security contributions. Real estate prices rose 11.7% in March prompting regulators to act fast to avoid asset price bubbles.
Real estate, property developers and construction material related stocks tumbled the most in Shanghai and Hong Kong but the sell-off was universal. The Shanghai Composite Index (SHA:000001) fell -150.00 points or -4.78%, the most in 2010 while the Hang Seng Index (INDEXHANGSENG:.HSI) managed to decline just half of that. There were not a single stock that rose in Shanghai and only Brilliance China Auto (HKG:1114) managed to stay in the black in Hong Kong on Monday.
Outlook for Chinese ADRs listed on American equity markets is bleak. Despite strong profit outlook from China Southern Airlines (NYSE:ZNH) and Semiconductor Manufacturing Int. (NYSE:SMI), shares are expected to trail Chinese markets lower.
China Southern Airlines (NYSE:ZNH) announced a profit increase of 400% from last year. China Southern Airlines expect profit jump of 400%.
Semiconductor Manufacturing Int. (NYSE:SMI), the largest Chinese semi firm, issued strong 2009 numbers and sweetened its 2010 Q1 outlook. SMI announces FY 2010 Q1 net profit outlook.
The fall last Friday took a toll on Chinese4 ADRs but the worst is yet to come. The number of China stocks trading above 50-DMA and 20-DMA have fallen significantly but the RSI is still neutral, suggesting more downside is possible.
Despite the dramatic fall of the Shanghai Composite Index (SHA:000001) more downside is likely. The index has just moved below its trading envelope and is far from oversold.