Bloomberg News

China Stocks Drop to Lowest Since 2009 on Consumer Staples Rout

December 03, 2012

China Stocks Drop to Lowest Since 2009 on Consumer Staples Rout

Workers package China Kweichow Moutai Distillery Co. baijiu liquor at the company's facility in the Maotai section of the Renhuai District in Zunyi, Guizhou Province, China. Photographer: Nelson Ching/Bloomberg

Chinese stocks fell, dragging the benchmark index to its lowest level in almost four years, as liquor makers and coal producers plunged.

A gauge tracking consumer-staple companies sank the most in three years. Kweichow Moutai Co. (600519), the world’s second-largest distiller by market value, tumbled the most since 2008 on concern demand for high-end liquor is decreasing. Datong Coal Industry Co. dropped 4.1 percent after the benchmark price for thermal coal decreased. The declines overshadowed data showing a manufacturing gauge rose to a seven-month high.

“The macroeconomic data may indicate that the economy is improving but people don’t feel that on the ground,” Li Guangming, an analyst at Dongxing Securities Co., said in a telephone interview from Beijing today.

The Shanghai Composite Index (SHCOMP) dropped 1 percent to 1,959.77 at the 3 p.m. local-time close, with about seven stocks declining for each that gained. The CSI 300 Index (SHSZ300) slid 1.4 percent. The Hang Seng China Enterprises Index lost 1.6 percent in Hong Kong. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.6 percent in New York on Nov. 30.

Concern that a possible wave of new share sales will lure funds from existing equities also dragged stocks lower. China has 493 companies awaiting initial public offerings on the mainboards in Shanghai and Shenzhen and on Shenzhen’s small and medium-sized enterprises board as of Nov. 29, according to Bloomberg calculations based on the latest data posted on the China Securities Regulatory Commission’s website.

Stock Discount

The Shanghai Composite trades at 10.8 times reported earnings, the lowest level since at least 1997, according to data compiled by Bloomberg. The index has fallen 11 percent this year, heading for a third straight year of losses, amid estimates the economy will grow at its slowest pace in a more than a decade this year.

Chinese companies traded on the mainland are 3.3 percent cheaper than their Hong Kong-listed counterparts, according to an index from Hang Seng Bank Ltd. The discount, which last week was the widest since January 2011, shows global investors are more optimistic than locals on the country’s growth prospects.

The Hang Seng China Enterprises Index (HSCEI) has jumped 16 percent since Sept. 5. Yuan-denominated shares are restricted to domestic investors and a limited number of foreign institutions, while their Hong Kong counterparts are open to overseas investors.

A gauge tracking consumer staples dropped 5.6 percent, the most among 10 industries in the CSI 300. Kweichow Moutai slumped 7.3 percent to 200.19 yuan, the biggest drop since September 2008. Wuliangye Yibin Co. tumbled 9.9 percent to 24.31 yuan. Jiuguijiu Co. lost 6.3 percent to 27.32 yuan.

Billionaire Stake

“Investors don’t have a good outlook for baijiu,” Liu Wei, an analyst at Masterlink Securities Corp., said by phone from Shanghai. “We haven’t seen Wuliangye increasing prices of their products even though this should be the peak season.”

Silver Base Group Holdings Ltd. (886), a Hong Kong-based distributor of high-end Chinese liquor including products by Wuliangye, reported Dec. 2 a six-month loss of HK$194.5 million ($25.1 million), citing weak consumption and increased inventories. Billionaire Cheng Yu-Tung cut his stake in Silver Base to 3.91 percent from at least 8.1 percent last month, according to disclosure filings to the Hong Kong stock exchange.

Silver Base shares plunged 5.8 percent to HK$2.29 today, the lowest level in three years.

Rising Inventories

Datong Coal dropped 4.1 percent to 7.73 yuan, the lowest close since March 17, 2009. Yanzhou Coal Mining Co. retreated 4.8 percent to 15.43 yuan, the lowest since July 5, 2010.

China’s benchmark price for thermal coal fell for a second week to the lowest level since the end of September as inventories at the port of Qinhuangdao increased.

November’s official manufacturing Purchasing Managers’ Index rose to 50.6. A gauge of new orders increased to its highest level since April and the output reading was the highest in six months, according to an official report. Non- manufacturing PMI climbed to 55.6 last month, the highest in three months.

Nine of 16 analysts surveyed over the last two weeks by Bloomberg News forecast the government will set next year’s economic growth target at 7.5 percent, unchanged from from 2012, while six expect a decline to 7 percent and one sees an increase to 8 percent.

American companies are supplanting China from the world’s 500 biggest stocks faster than at any time in the past decade. U.S. corporations make up 171 of the top 500 with a market capitalization of $10.6 trillion, compared with 159 valued at $8.24 trillion in 2009, according to data compiled by Bloomberg. PetroChina Co. and Industrial & Commercial Bank of China Ltd. lead the 24 Chinese firms worth $1.74 trillion, down from 34 with a value of $2.19 trillion.

Developers (SHPROP) advanced. Poly Real Estate Group Co. increased 2.4 percent to 11.75 yuan. Gemdale Corp. climbed 2.3 percent to 5.41 yuan. Home prices rose 0.26 percent in November from October, the most in four months, Soufun Holdings Ltd., the country’s biggest real estate website owner, said today.

-- Editors: Richard Frost, Darren Boey

To contact the reporter on 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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