Bloomberg News

Most Chinese Stocks Drop as Money-Market Rates Jump; Vanke Falls

December 28, 2011

Dec. 28 (Bloomberg) -- Most Chinese stocks fell as a jump in money-market rates to a two-month high signaled small companies will have difficulty borrowing money.

China Vanke Co. led developers lower after Caijing reported Shanghai home prices are set to decline this year. Zhejiang Honglei Copper Co. and Zhejiang Satellite Petrochemical Co. slid at least 7.8 percent in their trading debuts, pacing declines for smaller companies. Shaan Xi Provincial Natural Gas Co. paced an advance for natural-gas producers as investors speculated a government pricing reform plan may lead to higher prices.

“There won’t be an immediate and aggressive policy easing to counter the economic slowdown and investors are turning more pessimistic,” said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co. “Small-caps are facing the risk of cuts in earnings forecasts and a cash crunch.”

About five stocks fell for every four that gained in the Shanghai Composite Index, which rose 0.2 percent to 2,170.01 at the close. The gauge had slumped 1.5 percent earlier. The CSI 300 Index added 0.1 percent to 2,307.93. The Bloomberg China-US 55 Index declined 0.3 percent to 95.48 yesterday in New York.

The Shanghai Composite has fallen 7 percent in December as concern about an economic slowdown overshadowed the first cut in reserve requirement ratios since 2008 last month.

The measure trades at a record low of 10.4 times estimated earnings, according to data compiled by Bloomberg dating back to 2006. For the year, the measure is down 23 percent after the central bank raised interest rates three times to cool inflation and exports to Europe slowed because of the debt crisis.

Smallcaps Slump

The Shenzhen Small and Medium Enterprise Index dropped 0.3 percent and the ChiNext Index of startup companies slumped 1.3 percent. Zhejiang Honglei Copper slid 7.8 percent from its offer price to 11.80 yuan in its debut in Shenzhen while Zhejiang Satellite tumbled 11 percent to 35.65 yuan.

The seven-day repurchase rate, which measures interbank funding availability, gained 35 basis points to 4.80 percent as of 3:50 p.m. in Shanghai, set for the highest close since Oct. 31, according to a weighted average rate compiled by the National Interbank Funding Center. One basis point equals 0.10 percentage point.

The People’s Bank of China may suspend a scheduled sale of three-month bills tomorrow as it didn’t gauge demand this morning, according to two traders at primary dealers required to bid at auctions.

Vanke, the biggest listed property developer, slipped 0.4 percent to 7.34 yuan. Poly Real Estate Group Co., the second biggest, lost 0.9 percent to 9.67 yuan. China Merchants Property Development Co. lost 1.5 percent to 17.54 yuan.

Home Prices

The average price of new homes in Shanghai fell 0.6 percent this fiscal year as of Dec. 23, the first decline at least since data were available in 2005, Caijing reported, citing China Real Estate Information figures.

China CNR Corp., the nation’s second-biggest train maker, lost 1.4 percent to 4.18 yuan, its lowest close since the stock began trading in December 2009. CSR Corp., the largest, slid 1.2 percent to 4.28 yuan.

The railways minister may buy 86 billion yuan ($13.6 billion) of rail cars from CSR and CNR next year, the China Economic Times reported. The order was less than estimates, said Stanley Yan, an analyst at Masterlink Securities Corp.

Shaan Xi Provincial Natural Gas climbed 4 percent to 16.05 yuan, its biggest advance since Aug. 25. Shenzhen Gas Corp. gained 2.9 percent to 11.40 yuan.

Consumers in Guangdong province will pay a limit of 2,740 yuan per 1,000 cubic meters for gas, according to a statement from the National Development and Reform Commission. Urban users in Guangxi province will be charged as much as 2,570 yuan, it said. The country will evaluate the pricing in the two provinces and introduce it nationwide, the NDRC said, without giving a time frame. Investors speculated that the government is moving towards market-oriented prices, which would boost earnings of suppliers.

--Zhang Shidong. Editor: Darren Boey

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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