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Beijing. It is time to sell Chinese bank and property shares and buy into the telecom and consumer goods sectors, Morgan Stanley Asia executive director Jerry Lou said on Thursday.

“I have the least optimism for bank shares,” Lou told a media briefing in Beijing, adding that Chinese banks are at the peak of a boom cycle and that their lending spree is unsustainable.

“2010 may be the last year that we see relatively easy credit policy. Credit tightening will definitely be the key word for 2011 and beyond,” Lou said.

Meanwhile, it was revealed on Thursday that Chinese regulators have given the go-ahead to three banks, including Bank of China, to set up new consumer financing divisions as part of Beijing’s latest drive to spur greater domestic consumption.

The other two banks are Bank of Beijing and Bank of Chengdu, the China Banking Regulatory Commission said in a statement.

China announced in mid-2009 that it would begin a trial programme of consumer financing to speed up consumption growth as the country tries to wean its economy away from exports and investment. These are the first three banks to receive formal approval.

Lou said housing prices were likely to fall and that speculative buying in the real estate market will be discouraged by government tightening moves, including the possible launch of a long-awaited property tax.

“Housing prices are unreasonable from a financial perspective and unstable from a social perspective,” he said.

The sub-index for China banks and brokerage firms rose 100 percent in 2009, and the sub-index for property shares jumped 103 percent. Both outperformed the 80 percent rise in the benchmark Shanghai Composite Index.

Lou said that telecoms and consumer goods offered more value as investments in 2010 because more migrant workers were likely to move to cities in search of work.

“If you find migrant workers flooding to cities after Chinese New Year, you should buy telecoms shares immediately,” Lou said. “You should also buy food and beverage companies.”



Reuters