Real estate stocks dive on fears of new restrictions

With little positive news to encourage mainland stocks, exchanges in Shanghai and Shenzhen carried Friday's retreat into Monday.

The Shanghai Composite Index declined 32.74 points, or 1.51 percent, to close at 2,136.08; while the Shenzhen Component Index slumped 2.15 percent, or 198.98 points, to finish at 9,039.22.

Both markets opened slightly lower Monday thanks to continued pressure from weak July trade data released Friday and sank sharply in morning trading on losses to the heavily weighted real estate sector. In the afternoon session, the Shanghai Composite continued to drift downward as securities, insurance and cement stocks declined hugely.

China's embattled property developers saw their shares tumble Monday after local media reports mentioned that the government might soon introduce more restraints on the property market. The inspection team ordered by the State Council late July to review the implementation of cooling restrictions on property markets across the country reportedly uncovered instances where local governments did not follow through with these measures, which could result in another round of curbs on real estate sales, according to a report by the Shanghai Securities News Monday.

Poly Real Estate Group gave up 4.14 percent to 10.19 yuan ($1.60) on the day. China Vanke lost 4.21 percent to 8.42 yuan. China Merchant Real Estate fell 4.60 percent to 20.11 yuan.

With nothing on the horizon this week to support a market rebound, mainland stocks may continue to decline in the coming days, say analysts.

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