Chinese stocks slumped, led by financial and health-care companies, on concern regulators will restart approving initial public offerings and data this week will show trade weakened as inflation quickened.
Ping An Bank Co. dropped among smaller lenders as its 30- day volatility surged to the highest in four years. The China Securities Regulatory Commission may allow IPOs from June, the Shanghai Securities News reported, citing an unidentified person. Kangmei Pharmaceutical Co. slid the most in almost three months after technical indicators signaled declines.
The Shanghai Composite Index (SHCOMP) declined 1 percent to 2,324.29 at the close, taking its loss for the week to 1.5 percent. The CSI 300 (SHSZ300) dropped 1.2 percent to 2,619.48. The Hang Seng China Enterprises Index (HSCEI) fell 0.6 percent. The Bloomberg China-US 55 Index (CH55BN) retreated 0.1 percent in New York yesterday.
“Volatility has been rising, and will be unlikely to settle till we see reassurance on earnings, IPOs,” monetary policy and the National People’s Congress meetings, said Hao Hong, head of China research at Bank of Communications Co. in Hong Kong. “Risk aversion is on the rise.”
The Shanghai gauge plunged 3.7 percent on March 4 as the government ordered curbs to cool property prices, before rebounding 3.3 percent in the past two days. The gauge, up 19 percent since reaching an almost four-year low on Dec. 3, trades for 9.6 times projected 12-month earnings. That compares with the MSCI Emerging Markets Index’s 10.3 times, according to data compiled by Bloomberg.
The CSRC suspended issuance of IPO shares in late October as investors’ appetite for new stocks waned amid falling share prices. A media official at the CSRC, who asked not to be identified because of the regulator’s rules, declined to comment on the Shanghai Securities News report. People’s Insurance Co. plans to list its shares in the second half of the year, Ming Pao Daily News reported today, citing company Chairman Wu Yan.
A gauge tracking financial stocks slid 1.9 percent as its 30-day volatility traded at the highest level since May 2010. Ping An Bank slumped 2.1 percent to 23.74 yuan before the company reports earnings. The stock jumped 11 percent in the past two days following a 5.7 percent plunge on March 4. Bank of Beijing Co. retreated 3.6 percent to 9.18 yuan and Bank of Nanjing Co. declined 3.5 percent to 9.62 yuan.
Exports probably grew 8.1 percent last month, slowing from the previous month’s 25 percent gain, while imports dropped 8.5 percent, data tomorrow will show according to a Bloomberg economist survey. Inflation quickened to 3 percent in February, compared with 2 percent in the previous month, according to another report on March 9, while industrial output probably grew 10.6 percent last month.
“We think that the inflation and activity numbers, to be released on Saturday, may add to recent market concerns about the risk of further policy tightening,” Jian Chang, a Hong Kong-based economist at Barclays, wrote in a report yesterday. Trade data “could weigh on market sentiment,” she wrote.
The NPC, in session in Beijing, brings together the most powerful people in China under one roof every March. Earlier this week, outgoing Premier Wen Jiabao told delegates at the national legislature the government would keep its economic growth target at 7.5 percent, unchanged from 2012, while projecting a 10 percent jump in fiscal spending. Xi Jinping will become president and Li Keqiang premier at the end of the NPC.
Health-care stocks fell the most among 10 industrial groups on the CSI 300, declining 3.1 percent. Kangmei Pharmaceutical lost 6.6 percent to 16.24 yuan, paring this year’s gain to 24 percent. Shijiazhuang Yiling Pharmaceutical Co. retreated 1.9 percent to 25.86 yuan.
The drugmakers’ gauge has rallied 19 percent this year and surged to the highest level since July 2011 yesterday, when its 14-day relative strength index reached 67.20. Some analysts see a reading of more than 70 for the RSI (SZ399913), which measures how rapidly prices have advanced or declined during the specified time period, as a signal to sell.
Separately, Chinese banks and insurers’ Hong Kong units will be permitted to participate in a program that allows institutions to raise yuan offshore for investment in China, mainland regulators said. Participants will also be able to invest in stock-index futures, where before they were limited to equities and bonds, the China Securities Regulatory Commission said on its website yesterday.
The iShares FTSE China 25 Index Fund (FXI:US), the largest Chinese exchange-traded fund (FXI:US) in the U.S., advanced 0.7 percent to $38.50. Sohu.com Inc. (SOHU:US) dropped 11 percent to $43.44 in New York, the biggest slump since February 2012, after denying a report that it’s looking to go private.
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