China’s stocks fell for the first time in five days, led by energy and industrial companies, as a slump in producer prices signaled demand is weakening in the world’s second-biggest economy.
Datong Coal Industry Co. (601001) and Anhui Conch Cement Co. slid more than 2 percent after the statistics bureau said producer prices dropped 2.6 percent in April from 1.9 percent a month earlier. Poly Real Estate Group Co. retreated 2 percent, leading a gauge of property stocks to the biggest loss among five industry groups. Kweichow Moutai Co. (600519), China’s biggest liquor maker, jumped 4.4 percent after Shenyin & Wanguo Securities Co. recommended buying the shares.
The producer-price reading “indicates the economic recovery is weaker than expected as demand for industrial products looks pretty sluggish,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The market needs to digest profit taking after the recent rebound.”
The Shanghai Composite Index (SHCOMP) slipped 0.6 percent to 2,232.97 at the close. It closed yesterday at the highest level since March 27 after official data showed exports grew faster than estimated. Consumer prices rose 2.4 percent in April from a year earlier, the National Bureau of Statistics reported today, accelerating from a 2.1 percent gain a month earlier. That’s still below the goverment’s inflation goal of 3.5 percent for this year.
The Shanghai Composite has slumped 8.3 percent from a Feb. 6 high on concern slowing economic growth is hurting earnings. The index trades at 9.6 times estimated earnings for this year, compared with the seven-year average of 17.5, according to data compiled by Bloomberg.
The CSI 300 Index declined 0.6 percent to 2,527.79. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong slipped 0.3 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.8 percent to an 11-week high in New York yesterday as AutoNavi Holdings Ltd. (AMAP:US) and Baidu Inc. jumped.
A gauge of energy stocks on the CSI 300 slumped 1.9 percent today, the biggest loss among the 10 industry groups. Datong Coal, China’s third-largest coal company by capacity, slid 2.5 percent to 7.50 yuan. Yanzhou Coal Mining Co. (600188), the fourth biggest, lost 2 percent to 14.24 yuan.
Today’s consumer inflation reading compares with the 2.3 percent median estimate of 40 analysts surveyed by Bloomberg News and a 2.1 percent reading for March. The median projection for producer prices was for a decline of 2.3 percent. Data including industrial output and retail sales are due next week.
The drop in producer prices reflects falling commodity prices as well as excess manufacturing capacity, Yao Wei, China economist at Societe Generale SA in Hong Kong, said on Bloomberg Television. Companies are having a “difficult time” raising prices, which will keep affecting profit margins, she said.
The government has drafted plans to curb production overcapacity and may strictly control new projects in industries such as steel, cement and flat glass, the Shanghai Securities News reported today, citing unidentified people.
Anhui Conch, China’s biggest cement maker, fell 3.8 percent to 17.57 yuan. Huaxin Cement Co. (600801), the Chinese affiliate of Holcim Ltd., retreated 5 percent to 13.57 yuan. Poly Real Estate fell 2 percent to 11.98 yuan, while a gauge of real-estate companies in the Shanghai index slumped 1.7 percent.
The tolerance of decision makers for slowing growth will be higher than the market’s expectation, the China Securities Journal said in an editorial on the front-page of the newspaper today. As long as economic growth is maintained at an annual average of 7 percent, China will reach its goal of a “well-off society” in 2020, it said.
China’s money-market rate snapped a three-day drop as the central bank sold bills today for the first time since 2011, draining cash from the financial system as accelerating yuan gains spur capital inflows. The seven-day repurchase rate climbed 12 basis points to 3.11 percent as of 2:54 p.m. in Shanghai, while the yuan touched a 19-year high of 6.1336.
“The resumption of bill sales has killed off hopes of an interest-rate cut,” said Fan Xiaoyang, a bond analyst at Sealand Securities Co. in Shenzhen. “Short-term bond yields may rise.”
Kweichow Moutai added 4.4 percent to 197.18 yuan, lead a measure of consumer-staples to rise 1.2 percent for the biggest gain among CSI 300’s 10 sub-indexes.
A 54 percent drop in wholesale prices for Moutai’s baijiu liquor is luring wealthy people to stockpile for investment purposes, Tong Xun, an analyst at Shenyin & Wanguo Securities wrote in a report today. Wholesale prices have rebounded 30 yuan from an April low of 870 yuan, it said.
Trading volumes in the Shanghai stock index were 11 percent higher than the 30-day average, according to data compiled by Bloomberg. Thirty-day volatility was at 17.1, compared with this year’s average of 17.2, the data showed.
In U.S. trading, AutoNavi, a digital map content provider, rallied the most on record and Baidu, owner of China’s most-used search engine, rose to an almost three-month high.
AutoNavi has surged 40 percent over the past eight days to trade at (AMAP:US) 16 times estimated profit, from a valuation of 12 on April 26. That compares with an average multiple of 13 for the China-US gauge.
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