Stocks down a talk of tighter property curbs

Mainland stocks fell, dragging the benchmark index from a four-month high, as speculation the government will step up property curbs overshadowed gains by metals producers on the prospects output curbs will boost prices.

China Vanke Co dropped the most in two weeks after the 21st Century Business Herald said measures may include stopping loans to developers. Industrial Bank Co, part-owned by a unit of HSBC Holdings Plc, and China Merchants Bank Co slid at least 2 percent. Aluminum Corp of China Ltd gained 2.2 percent as China International Capital Corp said China's plan to cut energy usage may boost aluminum makers on likely production cuts.

"The first round of tightening hasn't met the government's objective of bringing down property prices," said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co, which oversees $285 million. "The current pickup in the property market has led to speculation that there will be more severe measures including a property tax."

The Shanghai Composite Index lost 3.07, or 0.1 percent, to 2695.29 on Wednesday, falling from the highest since May 12. The CSI 300 Index retreated 0.1 percent to 2980.97 on Wednesday.

A gauge of financial and property stocks in the CSI 300 slid 1.7 percent, the biggest drop among the 10 industry groups.

"The key drivers of the property bubble are excess liquidity and lack of investment alternatives, which are still largely in place," said Ken Peng, a Beijing-based economist for Citigroup.

Extra tightening measures may include restrictions on pre-sales of apartments and curbs on the discounts banks can offer on mortgages, according to Citigroup's Peng.

The 21st Century Business Herald said the new measures may include stopping loans to real estate developers, compulsory lowering of home prices and a ban on third-home purchases. The report cited an unidentified person close to the Ministry of Housing and Urban-Rural Development.