Bloomberg News

China’s Stocks Decline Before Profits Data; JiuGuiJiu Slumps

November 26, 2012

China’s Equity Futures Decline Before Industrial Profits Data

The Shanghai Composite advanced 0.6 percent last week. Photographer: Qilai Shen/Bloomberg

China’s stocks declined, with the benchmark index approaching the 2,000 level, before the release of industrial profits data tomorrow.

Liquor maker JiuGuiJiu Co. (000799) plunged by the 10 percent daily limit for a second straight day after its products were found to have excessive levels of plasticizer. Datong Coal Industry Co., the nation’s third-largest producer of the fuel, fell to the lowest since March 2009 on lower thermal-coal prices. Chongqing Iron & Steel Co. (601005) surged by the 10 percent daily limit after the local regulator approved its asset-purchase plan.

“The 2,000 level is a psychologically important gateway for investors,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Once it’s approached, some money will buy on dips on expectations about possible government support. But there’s no big room for the index to go up either as there’s a lack of positive macroeconomic news.”

The Shanghai Composite Index (SHCOMP) slid 0.5 percent to 2,017.46 at the close. The CSI 300 Index (SHSZ300) sank 0.8 percent to 2,175.60. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong lost 0.2 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 2.3 percent on Nov. 23.

The Shanghai Composite advanced 0.6 percent last week, the first gain in three weeks. It dropped below 2,000 during intraday trading twice last week and rallied to close above that level amid speculation of government support. The gauge has slumped 8.3 percent this year and trades at 9.6 times estimated profit for 2012, compared with the 17.7 average multiple since Bloomberg began compiling the data in 2006.

Economic Target

The statistics bureau is due to release industrial companies’ profits for October tomorrow. The profits rose 7.8 percent from a year earlier in September, the first increase in six months.

The annual central economic work meeting, which may be held next week in Beijing, may set 2013 gross domestic product growth target at 7.5 percent, the same as this year, the China Business News reported today, citing an unidentified person.

A measure of consumer staples stocks in the CSI 300 lost 1.7 percent, the second-biggest decline among the 10 industrial groups. JiuGuiJiu tumbled 10 percent to 38.54 yuan. The spirit maker apologized last week to consumers and investors in a stock exchange filing and said it is co-operating with requests from the provincial quality watchdog to run strict checks on its distribution and packaging processes.

Stock Volatility

Kweichow Moutai Co., China’s biggest producer of baijiu liquor by market value, slid 2.3 percent to 217.05 yuan. Wuliangye Yibin Co. (000858), the second largest, lost 2.3 percent to 27.08 yuan.

Datong Coal retreated 1.3 percent to 8.50 yuan. Shanxi Lu’an Environmental Energy Development Co. sank 2.2 percent to 16.30 yuan. Pingdingshan Tianan Coal Mining Co. (601666) fell 1.6 percent to 7.81 yuan.

China’s benchmark price for coal used in power stations fell to a range of 630 yuan to 640 yuan a metric ton as of yesterday, the lowest since Oct. 7, according to data today from the China Coal Transport and Distribution Association.

Trading volumes in the Shanghai Composite were 27 percent lower than the 30-day average today, according to data compiled by Bloomberg. Thirty-day volatility in gauge was at 13.2, compared with this year’s average of 17.

Asset Purchase

Chongqing Steel surged by the 10 percent daily limit to 2.61 yuan after the company said its plan to purchase assets from the parent was approved by Chongqing’s regulator of state- owned assets. The steelmaker said last month it plans to buy coking, iron-making assets and supporting facilities worth 16.9 billion yuan ($2.71 billion) from its parent.

China’s wage gains have moderated on weaker corporate profits, capping consumer demand as the government seeks to sustain a rebound after a seven-quarter economic slowdown.

Average urban salaries rose 12 percent in the first nine months from a year earlier without adjusting for inflation, slowing from 14.4 percent for all of 2011 and 13.3 percent in 2010, government data show.

The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., jumped 2.4 percent to $37.46 on Nov. 23, the highest close since Nov. 6. The ETF gained 4.7 percent last week, the most since June.

--Zhang Shidong. Editors: Richard Frost, Chan Tien Hin

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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