Mark Mobius Says China Property will Withstand Curbs

Mark Mobius, executive chairman at Templeton, is looking to buy Chinese property stocks on further declines, and said, “demand for housing in China will withstand government bank lending curbs,” according to Bloomberg.

“Recent policy changes on property and mortgages were introduced with the purpose of curbing speculation, but not hurting real demand,” Mobius said.

“We don’t see fundamentals of the property industry changing much because of these new policies,” Mobius said. “We are in general still light on Chinese developers and if this correction brings valuations to more attractive levels, it would be a good opportunity for us to step up our positions.”

A measure of 34 property stocks on the Shanghai Composite Index has plunged 7.3 percent this week after the government limited loans for third-home purchases, increased down payment requirements and raised mortgage rates. The Se Shang Property Index rebounded 1.6 percent today. The SE Shang Property Index has lost 17 percent this year, It trades at 19.9 times reported earnings, the lowest since February 2009.

Market mavens are split on the prognosis for Chinese stocks. Marc Faber, the publisher of the Gloom, Boom & Doom report, said today surging real estate prices and China’s “excessive” credit expansion are “danger signals” that growth is peaking. But Martin Currie fund manager Chris Ruffle said Chinese real estate stocks are becoming “more attractive” as government measures drove valuations to a year-low and made interest rate increases less likely. And of course the hyper quotable short seller, Jim Chanos said, “China’s on a Treadmill to hell.”

China’s cabinet has said stricter measures to control speculation are needed after property prices in 70 cities jumped a record 11.7 percent in March.

Economists are split on interest-rate increases. Royal Bank of Canada said higher rates are likely this quarter and could come this month, while Bank of America-Merrill Lynch sees no move until the fourth quarter.

China ordered developers yesterday not to take deposits for sales of uncompleted apartments without proper approval and barred them from charging “abnormally high” prices, stepping up efforts to prevent a property bubble. China’s banking regulator also told larger banks to conduct quarterly stress tests on property loans and ensure the risks of such lending is strictly controlled.