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Chinese market becoming extremely volatile

The real estate market as it exists in China is such that some of the highest highs and lowest lows can be experienced by companies within the same market.

Take for example Canton Property. They are a state-owned property development company working mainly within the Canton area, and according to the Property Week British magazine, they are the third highest performer in property (amongst 75 companies measured worldwide), being topped only by the XXI Century Development company and the Commercial Group in Britain.

Investors are seeing excellent returns on their investment on the back of this strong performance. However, many other Chinese real estate property developers are in a desperate mode as the Chinese government puts all its might in eliminating the chance of a US-style property market bubble emerging.

The fears of a bubble intensified recently as banks clamped down on the amount of credit they offer and therefore the lower liquidity served only to increase the amount of volatility that the property markets have been experiencing. With all of this going on, Chinese developers desperate for extra capital have decided to conduct an initial public offering on the Hong Kong Stock Exchange. This offering, worth approximately $9 billion, is being offered by companies, hopeful that it will stimulate the kind of activity that they need.

Whether or not the Chinese property developers will get help from Hong Kong is another story entirely, as many investors have pulled out of the HKSE since its 15 per cent drop in the last month. Fears of a US recession reach all over the world and that includes Hong Kong, which truly illustrates how desperate Chinese real estate companies must be if they are trying this move right now.