Bloomberg News

Chinese Stocks Fall

May 11, 2012

Chinese stocks fell to a two-week low, led by developers after Soufun Holdings Ltd., a real estate website owner, said the nation may continue property curbs this year.

The Shanghai Composite Index (SHCOMP) lost 0.3 percent to 2,404.31 as of the city’s 11:30 a.m. break. Five stocks declined for every four that rose in the gauge, which was poised for its lowest close since April 27. The CSI 300 Index (SHSZ300) dropped 0.3 percent to 2,649.14. Poly Real Estate Group Co. (600048), the nation’s second-largest publicly traded developer, dropped 1.3 percent. SAIC Motor Corp. led declines among consumer companies.

Benchmark indexes declined even after government data showed growth in China’s consumer prices slowed to 3.4 percent in April from 3.6 percent the previous month. Inflation stayed below the government’s 4 percent annual goal for a third month. The Shanghai Composite has climbed 9.3 percent this year on expectations the government will relax monetary policies and take more measures to bolster equities.

“Though inflation eased, investors had wanted it to fall even more, so stocks remained lower,” said Cao Xuefeng, an analyst at Huaxi Securities Co. in Chengdu. “The Chinese economy will stabilize in the second quarter and third quarter, so that will boost stocks if you hold on long enough.”

The Bloomberg China-US 55 Index (CH55BN), the measure of the most- traded U.S.-listed Chinese companies, fell 0.3 percent to 98.39, the weakest close since Jan. 24 in New York yesterday.

Liquidity Tools

About 8.2 billion shares changed hands in the Shanghai Composite yesterday, 3 percent higher than the daily average this year. Thirty-day volatility in the gauge was at 17.2 today. Stocks in the gauge are valued at 10.3 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

The inflation data came after the People’s Bank of China said in its first-quarter monetary policy report that it’s concerned about upside risk in prices. Overall price gains have remained in a downward trend but are unstable, according to the report. The central bank said it will use a combination of liquidity tools including bank reserve-ratio changes to adjust cash in the banking system, according to the report.

“The central bank will probably cut the reserve ratio requirement this weekend or the latest by next weekend,” Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai, said by phone today. “The requirement is still a bit high and it appears that inflation could ease further in the next two months.”

The central bank has cut reserve ratios once this year after boosting them and interest rates in 2010 and 2011 to tame inflation. Borrowing costs have not been reduced since 2008. China’s economy grew at the slowest pace since the second quarter of 2009 in the first three months of this year, as the European debt crisis and sluggish U.S. recovery crimped demand for the world’s largest exporting nation.

Investor Confidence

Figures on industrial production, fixed-asset investment, retail sales and new yuan lending are due at 1:30 p.m.

A 51 percent majority of finance professionals in a quarterly Bloomberg Global Poll said they are confident in the policies of President Hu Jintao. The share was the same as in January, unaffected by the aftermath of former Chongqing Communist Party head Bo Xilai’s March ouster, which clouded the outlook for this year’s once-in-a-decade leadership change.

China’s economy will either improve or remain stable this year, according to 68 percent of respondents, with the share anticipating a deterioration falling to 30 percent, the lowest level since the question was first included in the poll in September.

Lower Revenue

Poly Real dropped 1.3 percent to 12.62 yuan. Gemdale Corp. (600383) retreated 1.1 percent to 6.42 yuan. Over 60 percent home buyers, developers and experts think the home price won’t fall to a “reasonable” level this year, Soufun Holdings Ltd. said yesterday in an e-mailed report.

51job Inc., a Shanghai-based recruiting service provider, sank 8.3 percent in New York, the most since Sept. 30, to $51.30. Second-quarter (JOBS:US) sales will be between $57.2 million and $59.5 million in the second quarter, compared with revenue of $60.5 million in the first three months of this year, the company said in a statement after markets closed on May 9.

7 Days Group Holdings Ltd. (SVN:US), a budget hotel operator based in Guangzhou, China, fell 5.7 percent to $10.88, the lowest close since July 2010. Sales will climb to as much as 640 million yuan ($101 million) in the three month ending in June from 546 million yuan in the previous quarter, the company said on May 9. The median forecast (SVN:US) of seven analysts surveyed by Bloomberg was for an increase to 647 million yuan.

Average revenue per share for Chinese companies in the Bloomberg China-US gauge may decline to $10.10, the lowest level since the second quarter of 2010, from $11.70 in the first three months of this year, according to data compiled by Bloomberg.

Of the 23 companies on the China-US index that have reported quarterly earnings since April 1, 10 fell short of analysts’ predictions, from Yanzhou Coal Mining Co. (YZC:US), China’s fourth-largest producer, and China Telecom Corp. (CHA:US), the nation’s biggest fixed-line carrier, data compiled by Bloomberg show.

-- Editors: Darren Boey, Richard Frost

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net

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


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Companies Mentioned

  • JOBS
    (51job Inc)
    • $71.24 USD
    • 1.54
    • 2.16%
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