China told local authorities to "decisively" curb real estate speculation and take steps to rein in the property market after prices rose the most in two years last month. Share of developers declined.

Cities that have had "excessively fast" price gains should "promptly" impose home-purchase restrictions if they've not done so already, according to a statement yesterday after a State Council meeting headed by Premier Wen Jiabao. Provincial capitals and municipalities reporting directly to the central government should publish annual price control targets to keep new-home costs "basically stable," according to the statement.

The nation's property market rebounded starting in the second half of last year as demand from buyers concerned that prices were rising again defied the central government's commitment to maintaining property controls. Home prices rose 1 percent last month from December, the most since January 2011, according to data from SouFun Holdings Ltd. (SFUN), the nation's biggest property website.

"Investors are still worried that there are new tightening policies to come out in the next couple of months," said Tian Shixin, a Shanghai-based property analyst at BOC International China Ltd., in a phone interview. "What Wen said yesterday was more or less a restatement of the current policies, but people care more about what the new premier will do on the property market."

David Fuller's view These latest efforts to curb real estate speculation in China will almost certainly have been approved by the country's newly appointed top leaders as well.

This restriction of credit has also interrupted China's stock market recovery, as you can see from these charts of the Shanghai A-Shares Index (weekly & daily), since it reopened following last week's closure during the Chinese New Year.

Technically, this reaction has broken uptrend consistency for mainland China's main stock market index, confirming a peak of at least near-term significance. A similar peak of at least near-term significance is also evident on the Hong Kong Hang Seng Index (weekly & daily), which resumed its reaction today.

Given China's importance, this message has also sent out shock waves which are beginning to affect a number of other stock markets around the globe, some of which are reviewed below and also in Eoin's section.

I think China's credit tightening, while it lasts, may be more important than recent reports of the debate and discussions among US Federal Reserve members concerning the extent and timing of quantitative easing (QE) in the US economy.

However, any discussions concerning less accommodative monetary policy, by officials representing the world's two largest economies is likely to induce vertigo in global stock markets that are clearly temporarily overstretched relative to their rising 200-day moving averages, following strong rallies since approximately mid-November 2012.

During January's additional stock market surge, Fullermoney often cautioned that such strong gains could easily produce a reaction in February. Many of these were in Audios but here are four recent cautions from Comment of the Day, with links to the copy:

Monday 28th January:
"Today, we know that we have a short-term overbought condition that could easily produce a reaction in February."


Tuesday 29th January:
"Clear downward dynamics, particularly if evident on a commonality basis across global indices, would likely suggest at least a loss of momentum ahead of a corrective phase."


Wednesday 30th January:
"I think we are quite likely to see reactions and consolidations in most stock markets over the next few weeks. However, performances will vary, as always, and I would not be surprised to see additional gains over the medium term."


Thursday 7th February:
"Eoin and I have been saying since late January that a global stock market reaction was imminent. We also think that it could easily extend to a correction of over 10% for some indices."


This process is now underway as you will see from the additional indices shown in the following review: