China's stocks climbed to a new peak in four months after the week-long National Day holiday, with limited effects from the government's firm stance to curb property speculation amid soaring housing prices.

The new rules, including raising down-payments and expanding property tax trials nationwide, represent the government's resolve to cool the overheated property market. However, specific policies about property taxes haven't been released, which decreased the risk involved in investing in real estate shares.

"Some market participants might have already estimated the strength of the tightening measures, so there were limited effects on the stock market," said Yong Zhiqiang, senior analyst at Haitong Securities Co.

A report from Guotai Asset Management Co Ltd said the new regulations may curb the cost of housing in the short term. Nonetheless, in the long term, a slew of uncertainties remain in the A-share market, making it hard for real estate shares to maintain growth.

The government increased the down-payment and interest rates on second-home mortgages in April and restricted the number of new homes residents can buy in some cities.

Furthermore, on Sept 29, the State Council raised the down-payment to 30 percent for all first-home buyers, instead of limiting it to homes larger than 90 square meters. Meanwhile, the government suspended bank loans for third-home purchases from Oct 1 and plans to extend property taxes throughout the country.

Over the first five days of October, the average sales of commercial residential property in Beijing was just 124 homes, compared with the average number of 655 for the last four days of September, according to figures from the Beijing Real Estate Trade Management Network.

At the same time, only 83 second-hand homes were purchased, an average of 16.6 per day. This marked a 93 percent decrease compared with the 244 homes per day during the first five days in September.

In line with the new rules, the Shanghai municipal government announced it is to restrict every household to buying only one commercial residential property as of Oct 7. The supply of residential land will also be increased.

"Developers will struggle in the short term as the new tightening policies dampen sentiment," said Zhou Xi, a strategist at Bohai Securities Co. Whether the A-share market will keep playing catch-up depends on the adverse policies' effects on controlling the cost of housing, he added.

The Shanghai Composite Index climbed 3.1 percent to 2738.74 by the close on Friday, the most since May 24, and the CSI 300 Index advanced 3.7 percent to 3044.23, after the close from Oct 1 until Oct 7 for the National Day holiday.

"It has been a long time since the government highlighted the tightening of housing policies. It is less likely that more speculative capital will flow into the stock market," said Gui Haoming, the chief analyst of Shanghai-based Shenyin & Wanguo Securities Co Ltd. Instead, more inflows are attracted by expectations of a gradual appreciation of the yuan, he said.

(China Daily October 11, 2010)