Bloomberg News

Most Chinese Stocks Advance, Led by Consumer Shares; BYD Drops

March 26, 2012

Most Chinese stocks rose as speculation the government will introduce measures to boost consumer spending overshadowed slowing earnings growth.

Kweichow Moutai Co. (600519) advanced for a third day, leading gains for consumer stocks, after Citic Securities Co. boosted its earnings forecast for the nation’s biggest producer of baijiu liquor. Jiangxi Copper Co. added 1.6 percent on higher metal prices. Developer China Vanke Co. declined to the lowest in a month after Beijing News cited a housing ministry official as saying property prices won’t rebound this year. BYD Co., the carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., slid 0.7 percent after forecasting a profit slump.

“First-quarter economic growth and earnings will be poor and the market will be disappointed,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “On the other hand, we’ll see more pro-growth policies. That may offset some of the downside risk of the market.”

The Shanghai Composite Index (SHCOMP) rose 0.94 points, or less than 0.1 percent, to 2,350.48 as of 1:16 p.m. local time. Almost the same number of stocks gained as those that fell. The CSI 300 Index (SHSZ300) added 0.1 percent 2,555.09. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.7 percent in New York on March 23.

Thirty-day volatility in the Shanghai Composite was at 15.27 today, near a five-day high. About 7.7 billion shares changed hands in the gauge on March 23, or 14 percent lower than the daily average this year. Stocks in the measure trade at 9.8 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

Economic Support

The Shanghai Composite fell 2.3 percent last week, the steepest weekly drop since the period ended Dec. 16, after reports showed profits for state-owned companies dropped in the first two months of this year and manufacturing may contract in March. It has advanced 6.9 percent this year on speculation the government will take measures to boost economic growth.

China will expand a value-added tax reform trial that will avoid double taxation, the Xinhua News Agency reported, citing Xiao Jie, director of the State Administration of Taxation.

The government started replacing a turnover tax with a value-added tax in the transport industry and some service industries in Shanghai on Jan. 1, Xinhua said. Replacing the turnover tax could boost economic growth by 0.5 percentage point and export growth by 0.7 percentage point, create 700,000 jobs and result in tax reductions of more than 100 billion yuan ($15.9 billion), Xiao said, according to Xinhua.

Consumer Stocks

The China Securities Regulatory Commission plans to raise quotas for qualified foreign institutional investors to invest in domestic capital markets and will broaden the scope for their investments, Vice Chairman Yao Gang said at a forum hosted by Caixin media group yesterday.

The plan is intended to attract more overseas funds into the domestic markets and the CSRC also plans to lower threshold for Hong Kong listings and encourage financial institutions to set up overseas branches, Yao said.

Measures of consumer staples and discretionary stocks in the CSI 300 advanced 1 percent and 0.4 percent respectively today, the biggest gainers among the 10 industry group.

Kweichow Moutai rose 1.2 percent to 214.53 yuan, set for the highest close since Aug. 31. Citic Securities lifted its earnings per-share forecast for Moutai this year by 6.7 percent to 12.06 yuan and for 2013 by 7.4 percent to 15.79 yuan, Huang Wei and Wen Hongwei, analysts at the nation’s biggest listed brokerage, wrote in a note dated March 23. Moutai said last week net income increased 73 percent last year.

Earnings Concerns

Jiangsu Yanghe Brewery Joint-Stock Co. (002304) advanced 2.5 percent to 161.21 yuan. Hisense Electric Co., China’s biggest manufacturer of flat-panel televisions, climbed 2.6 percent to 19.08 yuan.

“We like consumer staples which will benefit from wage increases,” Pu Yonghao, Hong Kong-based chief investment strategist at UBS Wealth Management, said on Bloomberg Television today. This year’s stocks rally is not over, and emerging-market equities may rise again in the second half, he said.

Jiangxi Copper, China’s biggest producer of the metal, gained 1.6 percent to 25.96 yuan. Tongling Nonferrous Metals Group Co., the second biggest, added 1.7 percent to 20.76 yuan.

Copper climbed for a second day on speculation that demand from China and the U.S. remains robust. Three-month copper rose as much as 0.4 percent to $8,414 a metric ton on the London Metal Exchange.

Three hundred and seventy-five companies in the Shanghai Composite have released annual earnings. They posted profit growth of 19 percent on average, trailing analyst estimates by 3.8 percent, Bloomberg data showed. That compared with an increase of 38 percent in the previous year.

BYD Drops

BYD slid 0.8 percent to 25.80 yuan after the company said yesterday first-quarter net income may plunge 65 percent to 95 percent.

China’s property prices won’t rebound this year as central and local governments persist with policies to curb investment and speculation, Beijing News reported yesterday, citing Qin Hong, director of policy research at the Ministry of Housing and Urban-Rural Development.

There are also unsold properties, which will prevent prices from rising, the paper said, citing Qin. The government will “certainly” expand property taxes from the current trial programs as a long-term measure to curb speculation, Qin was cited as saying.

Vanke, the nation’s biggest listed property developer, fell 1.5 percent to 8 yuan.

Property Prices

New home prices fell in 27 of 70 Chinese cities last month from a year earlier, while prices were unchanged in six others, China’s statistics bureau said on March 18. That was the worst performance since the government started releasing individual data for 70 cities at the start of 2011.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., was little changed at $36.92 on March 23, down 4.8 percent last week.

The first initial public offering by a Chinese company in the U.S. since August raised 39 percent less than planned as New York-listed stocks dropped last week amid concern the world’s second-largest economy is faltering.

Vipshop Holdings Ltd., a Chinese online discount retailer, tumbled 15 percent on its first day of trading after its share sale. While a 1.4 percent jump in oil boosted the Bloomberg China-US Equity Index by 0.7 percent on March 23, the gauge of the most-traded Chinese stocks in New York slid 0.3 percent in the week.

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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