Bloomberg News

Chinese Stocks Swing Between Gains and Losses; Drugmakers Jump

January 06, 2013

Chinese stocks swung between gains and losses as technology shares declined, while health-care companies rallied.

GoerTek Inc., a supplier to Apple Inc., dropped 3.9 percent, leading a slump for technology shares. Beijing Tiantan Biological Products jumped 10 percent after the government said it is targeting average annual output growth of more than 20 percent for the biomedical industry from 2013 to 2015.

The Shanghai Composite Index (SHCOMP) slipped 0.2 percent to 2,272.58 at 10:06 a.m. local time, after gaining as much as 0.2 percent. The index’s 14-day relative strength index was at 76.94 on Jan. 4, when it rose 0.4 percent on its first trading day this year. The RSI measures how rapidly prices have advanced or declined during the specified time period. Some analysts see a reading of more than 70 as a signal to sell.

“Investors are taking profits in the very short term after sharp gains recently,” said Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai. “The rally momentum hasn’t ended. Investors are still waiting for the new government to act with policy initiatives and there are a lot of expectations.”

The CSI 300 Index (SHSZ300) slipped 0.2 percent at 2,518.99 today, after briefly rallying more than 20 percent from last year’s low on Dec. 4. An advance of a 20 percent or more from a low signals a bull market to some investors. The Shanghai index posted its largest monthly gain since July 2009 last month after the government said it would spend more on urban development to drive economic growth.

Urban Transport

Policy makers will support the development of environmentally friendly urban transport systems and offer tax breaks and fuel subsidies for mass transit vehicles, according to a statement by the State Council, or cabinet, posted on the central government’s website on Jan. 5.

Li Keqiang, No 2 in the ruling Communist Party’s hierarchy, is championing urbanization as a new growth engine that will boost incomes and consumption. The focus on improving public transport comes as the government faces growing discontent over pollution that’s caused partly by surging car ownership.

The biggest monthly gain for Chinese stocks in two years is poised to falter should the nation’s new leaders fail to push ahead with reform of state-owned companies, according to the Shanghai government’s investment arm.

The new generation of Communist Party leaders headed by Xi Jinping needs to break the monopoly of government enterprises by introducing more competition and to ease financing for smaller companies to keep economic growth at about 7 percent to 8 percent over the next 10 years, Pang Yang, chief executive officer with the financial-service advisory unit of Shanghai Alliance Investment Ltd., said in an interview at a Bloomberg hedge-fund forum in Shanghai on Jan. 5.

The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong added less than 0.1 percent today. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, gained 0.4 percent in New York on Dec. 4.

-- Editors: Allen Wan, Richard Frost

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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