China's Stocks Snap Eight-Day Gain on Housing Policy Reversal; Vanke Falls

China’s stocks fell, dragging the benchmark index lower for the first time in nine days, on concern the government will retain measures to curb gains in housing prices this year.

China Vanke Co. (000002) led a gauge of developers down the most in three months after the China Securities Journal said Shanghai scrapped a plan allowing some non-local residents to buy second homes. PetroChina Co. slid the most in almost two weeks as crude oil traded near a one-week low. Chinese liquor maker Kweichow Moutai Co. and Wuliangye Yibin Co. advanced at least 1.3 percent on speculation earnings growth for consumer staples producers will be shielded from an economic slowdown.

The Shanghai Composite Index (SHCOMP) sank 23.37 points, or 1 percent, to 2,428.49 at the close, snapping an eight-day, 4 percent gain. The CSI 300 Index (SHSZ300) lost 1.1 percent to 2,634.14. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 1.7 percent yesterday.

“The property policy reversal has damped investors’ expectations that an easing of policies would put the economy back on track,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. “That will weigh on sentiment given we’ve had a good rally this year.”

The Shanghai index advanced 5.9 percent in February, capping its biggest monthly gain since October 2010, on the prospect the central bank will add to a Feb. 18 cut in reserve requirements to halt a decline in economic growth. For the year, the measure has rebounded 10 percent and trades at 10.1 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

Residence Permits

The 14-day relative strength measure for the Shanghai Composite, measuring how rapidly prices have advanced or dropped during a specified time period, was at 71.7 yesterday. Readings above 70 indicate a price may be poised to fall.

A measure tracking property stocks in the Shanghai Composite sank 3 percent today, the most since Nov. 30. It had advanced 17 percent this year through yesterday on expectations local governments will challenge Beijing’s policy of cooling housing prices.

Vanke, the biggest listed property developer, dropped 2.8 percent to 8.28 yuan. Poly Real Estate Group Co., the second largest, declined 3.3 percent to 11.10 yuan. Gemdale Corp. (600383) retreated 3.2 percent to 5.80 yuan.

Shanghai halted a plan to allow non-local residents who have held the city’s residence permits for three years to buy second homes, the China Securities Journal reported yesterday, citing local housing transaction centers. The city was loosening its definition of locals to let the residence-permit holders to make second home purchases, the Shanghai Securities News reported last week.