latest restrictions on the property market might have rattled
property stocks and the steel market earlier this week, but
they could have less impact than first feared, market
participants told AMM sister publication Steel
Markets initially were thrown by
the new policies, including a 20-percent capital gains tax
intended to snuff out a speculative buy-to-sell boom before it
If the moves really amount to a
serious challenge to the property and construction
sectors gradual recovery, it would be bad news for
Chinas State Council had
already suggested in February that it would attempt to control
house prices, which have risen for nine consecutive months
starting last June.
Analysts at Hong Kong bank UOB
Kay Hian Ltd. downgraded their forecast for steel demand in
property to no change this year from previously estimated
3-percent growth. "In a worst-case scenario, assuming property
sector demand (will) decline by 10 percent, total steel demand
will decline by 4 percent in 2013," analyst Helen Lau said.
But markets this week generally
followed most observers in concluding that this wasnt
another major clampdown on a sector that accounts for about a
third of Chinas steel consumption.
There are various reasons to be
underwhelmed by the new property curbs, including that they are
aimed squarely at speculative buyers and could end up
stabilizing prices for the benefit of real buyers.
"The tax on reselling houses may
encourage people to buy new houses, so demand from new
construction projects could rise," a Shanghai-based trader
"(As the) economic situation
continues to improve ... it is likely that steel demand from
other sectors, such as machinery, home appliances, oil and the
auto industry, will help offset the mild slowdown (1 percent)
in steel demand from property," Lau said.
Steel and iron ore tags, which
lost ground early this week, had largely recovered by March 7
as investors turned their sights to political meetings under
way in Beijing.
The most important longer-term implication of the new
property policy is to signal that the government will intervene
early to prevent the emergence of a destabilizing property
bubble. And that should, in theory, lead to flatter but more
stable steel demand from construction.
A version of this article was first published by AMM sister
publication Steel First.