Bloomberg News

Most China Stocks Fall, Led by Financials; Miners Gain

November 07, 2012

Most Chinese stocks fell as earnings concerns dragged financial shares lower, overshadowing gains by mining companies after Barack Obama won re-election as U.S. president.

Founder Securities Co. (601901) paced losses for brokerages after the company reported October profit that was less than half the previous month’s level. Jiangxi Copper Co. led a gauge of material stocks to the steepest advance among industry groups as metal prices climbed on the prospect the U.S. will maintain stimulus policies. SAIC Motor Corp., China’s largest carmaker, jumped the most in a week after sales rose.

Five stocks dropped for every four that advanced in the Shanghai Composite Index (SHCOMP), which slipped less than 0.1 percent to 2,105.73 at the close. The gauge rose 0.3 percent after Obama’s victory was declared and erased gains as investors focused on a Chinese leadership congress starting tomorrow and the strength of earnings in an economy that grew last quarter at the slowest pace in more than three years.

“The market has returned to fundamentals,” said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai, which oversees $285 million. “There is not much hope that earnings and growth will pick up soon this quarter or early next year.”

The CSI 300 Index (SHSZ300) lost 0.2 percent to 2,287.50, erasing a 0.4 percent gain. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong added 0.3 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.5 percent.

Global Problems

Obama, a Democrat, captured 303 Electoral College votes, well beyond the 270 needed to win the White House, compared with 206 for Romney, the Republican challenger. Romney had pledged to label China a currency manipulator if he had won.

“The prospect of China being called a currency manipulator will not transpire because that will throw the whole spectrum of protectionism into the current problems that we already have facing the global economy,” Arjuna Mahendran, the Singapore- based head of Asia investment strategy at HSBC Private Bank, which oversees $409 billion, said in a telephone interview today.

Trading volumes in the Shanghai Composite were 12 percent below the 30-day average today, data compiled by Bloomberg show. Thirty-day volatility in the gauge was at 15, lower than this year’s average of 17.2. The index trades at 10 times estimated profit for 2012 after falling 4.3 percent this year, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006.

Lower Profit

A gauge of financial shares in the CSI 300 that includes brokerages and property developers slumped 0.6 percent and was the biggest drag on the broader index. Founder Securities lost 2.3 percent to 4.25 yuan after October net income fell to 14 million yuan ($2.2 million) from September’s 31 million yuan. Industrial Securities Co. slid 2.8 percent to 10.61 yuan after reporting a 48 percent drop in October profit from a year ago.

Third-quarter profit for Chinese listed companies fell 3.4 percent from a year earlier, accelerating from a 1.8 percent drop in the second quarter, Huang Xindong and Chen Jianxiang, analysts at Shenyin & Wanguo Securities Co., wrote in a Nov. 5 report. Net income for companies excluding financials fell 18.2 percent in the period, matching the decline in the second quarter, according to the report.

A gauge of material companies jumped 1 percent, the most among the CSI 300 Index’s 10 industry groups. Spot gold gained 0.7 percent to $1,727.82 an ounce. Copper rose 1.1 percent to $7,788 a metric ton in London.

China Congress

Jiangxi Copper, China’s biggest producer of the metal, rose 1.2 percent to 21.51 yuan. Tongling Nonferrous Metals Group Co., the second largest, climbed 2.2 percent to 18.08 yuan. Zijin Mining Group Co. (601899), the biggest bullion producer, advanced 1.3 percent to 3.92 yuan.

SAIC climbed 2.5 percent to 13.84 yuan after the company posted a 21 percent gain in October vehicle sales to 414,471. Anhui Jianghuai Automobile Co., a maker of bus and truck parts, advanced 2.7 percent to 5.40 yuan.

China’s Communist Party will start a meeting in Beijing tomorrow that will formally choose the next generation of the nation’s leadership, with Xi Jinping expected to be chosen as general secretary. Delegates to the 18th party congress are expected to pick Li Keqiang as one of seven or nine members of the Politburo Standing Committee that rules the party and hence the nation.

“There is still a huge amount of uncertainty around the makeup of the next Standing Committee, with a number of mutually exclusive lists having been published by different, normally credible, sources,” Michael Pettis, chief strategist at Guosen Securities Co., said yesterday in e-mailed comments. “Since the composition of the Standing Committee will tell us a great deal about the pace and urgency of economic reform, uncertainty about one creates uncertainty about the other.”

To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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


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