Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Xinyuan Real Estate , a residential real estate developer in China, tumbled as much as 18% following the announcement of new housing sector restrictions ready to be put in place by China's cabinet.

So what: On late Friday, China's cabinet voted for stricter implementation of the 20% capital gains tax on homes sales, increasing loan rates on buyers in cities where home prices are rising too rapidly, and other homebuyer restrictions. Previously, sellers had a choice between paying the 20% capital gains tax or between 1% and 2% the value of the home -- that appears as if it will no longer to be a choice, and it could be the impetus that dries up investment purchasing for the time being.


Now what: Up until now, Xinyuan has had no trouble selling its properties in China, but with the market for secondary homes becoming so restricted, it may see growth ebb a bit. Today's reaction seems pretty reasonable, especially given the still prevailing distrust of Chinese small-cap stocks on Wall Street. It's worth adding to your watchlist, but it's a company I'm perfectly happy observing from afar.

Craving more input? Start by adding Xinyuan Real Estate to your free and personalized Watchlist so you can keep up on the latest news with the company. 

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article Why Xinyuan Real Estate Shares Tumbled originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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