Bloomberg News

Most Chinese Stocks Fall as Developers Slump; Utilities Advance

January 31, 2013

Most Chinese stocks fell, led by property developers, amid concerns over equity valuations at a 10-month high. Miners and utilities advanced.

Gemdale Corp. (600383) and Poly Real Estate Co. sank more than 5 percent on speculation Beijing had submitted a property tax plan to the Chinese cabinet for approval. Health-care stocks dropped for the third day as technical indicators signaled the stocks are overbought. Jiangxi Copper Co. jumped to an eight-month high, pacing gains among material producers, while SDIC Power Holdings Co. led utilities higher.

The Shanghai Composite Index (SHCOMP) added 0.1 percent to 2,385.42 at the close, even as five stocks fell for every four that gained. The index rose 5.1 percent this month. The CSI 300 (SHSZ300) lost 0.1 percent to 2,686.88 today, while the Hang Seng China Enterprises Index (HSCEI) slumped 0.5 percent in Hong Kong. The Bloomberg China-US 55 Index (CH55BN) fell 0.3 percent yesterday.

“Some investors are worried the market will have a big correction after the big rally and sold some stocks with weak fundamentals and earnings,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The upward momentum is still there because the macro-economy isn’t an issue.”

The Shanghai index has climbed 22 percent from a three-year low on Dec. 3, signaling a bull market to some investors. The gauge is valued at 13.2 times reported profit, the highest level since March 13, data compiled by Bloomberg show. That’s still lower than the measure’s seven-year average multiple of 21.4 times, the data show.

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The index’s trading volumes were 9.8 percent higher than the 30-day average for this time of day. Its 30-day volatility was at 17.6, compared with last year’s average of 17.1.

The Shanghai Composite jumped for a second month on signs economic growth is accelerating and amid speculation China’s new leaders will promote urban development.

The National Bureau of Statistics and China Federation of Logistics and Purchasing are due to release a manufacturing index for this month tomorrow. The Purchasing Managers’ Index may rise to 51 from 50.6 a month earlier, according to the median estimate of 33 analysts in a Bloomberg survey. Readings above 50 indicate expansion.

China’s stocks are poised to outperform all Group of 20- nation equity markets in 2013, according to Citigroup Inc. Equities will build on the advance in the first half of 2013 as earnings growth exceeds analysts’ estimates, Minggao Shen, the Hong Kong-based head of China research at Citigroup, said in an e-mailed response to questions yesterday.

Developers Slump

A gauge of developers dropped 3.9 percent today, the most among the five industry groups in the Shanghai index. Gemdale lost 5.6 percent to 7.40 yuan, the most since Aug. 2. Poly Real slid 6.2 percent to 13.22 yuan. Beijing submitted a property tax plan to the State Council, China Times reported, citing an unnamed person close to the local finance and tax department. The Beijing Tax Bureau hasn’t been informed of the plan, it said in a post on its official Sina Weibo account.

The property measure slumped 2.1 percent this month, the only one among the groups to decline.

A gauge of CSI 300 health-care stocks fell for a third day, the longest streak since Dec. 12. The measure rose 12 percent this month, the biggest gain among the 10 industry groups. The measure’s 14-day relative strength index, which measures how rapidly prices have advanced or declined in that time, was at 72 on Jan. 29 and 69.7 yesterday. Some analysts see a reading of more than 70 as a signal to sell.

Jiangxi Copper

China Resources Double-Crane Pharmaceutical Co. (600062), whose reported price-earnings ratio is 72 percent above the CSI 300 Index, lost 1.4 percent to 24.72 yuan. Beijing SL Pharmaceutical Co. dropped 1 percent to 47.78 yuan.

Gauges of raw-material producers and utilities in the CSI 300 advanced at least 1 percent, the most of the groups.

Jiangxi Copper gained 5.2 percent to 26.62 yuan, the highest close since May 8. Yunnan Copper Industry Co. (000878) added 2 percent to 15.56 yuan. SDIC Power, a hydroelectric and thermal electric generator, jumped 5.8 percent to 5.86 yuan.

Utility stocks jumped 11.9 percent from Dec. 3 through yesterday, the second-worst performer on the CSI 300, while material stocks are the fourth worst, gaining 22.2 percent during the same period.

Brokerages led a rally for financial companies this month. Haitong Securities Co., the nation’s second-biggest listed brokerage, rose 0.5 percent today, adding to a 16 percent jump this month. China’s brokerages may post 13.7 percent growth in net profit this year, bolstered by a jump in share-trading volumes and rising interest in margin financing as well as short selling, according to Guosen Securities Co.

The iShares FTSE China 25 Index Fund (FXI:US), the largest Chinese exchange-traded fund in the U.S., gained 0.1 percent to a one- week high of $41.59 in New York yesterday.

--Zhang Shidong and Weiyi Lim. Editors: Darren Boey, Allen Wan

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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Companies Mentioned

  • FXI
    (iShares China Large-Cap ETF)
    • $39.87 USD
    • -0.41
    • -1.04%
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