China’s stocks fell for the first time in five days amid conflicting data on the nation's services industry and before a Communist Party leadership congress and U.S. presidential elections this week.
Jiangxi Copper Co. led declines for metal producers after a gauge of raw materials slid by the most in a month on Nov. 2. Kweichow Moutai Co. (600519), China’s largest maker of baijiu liquor, sank 2.2 percent, pacing a drop among consumer stocks on speculation sales will slow. BYD (002594) Co., an automaker, jumped 3.3 percent after after the city of Shanghai submitted a subsidy plan for new energy vehicles to the national government.
The Shanghai Composite Index (SHCOMP) lost 0.1 percent to 2,114.03 at the close. A services purchasing managers’ index released by HSBC Holdings Plc and Markit Economics dropped to 53.5 in October from 54.3 the previous month. That contrasts with a separate PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing on Nov. 3 that showed a jump to 55.5 last month from September’s 53.7.
“With the U.S. and China changing leadership, investors are more risk averse,” said Xu Shengjun, an analyst at Jianghai Securities Co. in Shanghai. “There’s much uncertainty for the economy before the congress. Data such as the non-manufacturing PMI is one-off and only shows that the economy is more stable, it doesn’t mean it is going to rebound. At best, we will see a short-term gain in stocks now, but any increase is temporary.”
The Communist Party will start on Nov. 8 its 18th Congress when 2,270 delegates meet over several days to decide on leadership changes that will probably see Xi Jinping replace Hu Jintao as general secretary of the party that’s ruled China since 1949. In the U.S., national and state-level data show President Barack Obama with a slim lead in the quest for the Electoral College votes needed to win this week’s election.
The CSI 300 Index (SHSZ300) sank 0.2 percent to 2,301.88 today, while the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong fell 0.3 percent. The Bloomberg China-US Equity Index slipped 1.1 percent on Nov. 2.
Trading volumes in the Shanghai Composite exceeded the 30- day average for this time of day by 7.2 percent, data compiled by Bloomberg show. Thirty-day volatility in the gauge was at 16.4, lower than this year’s average of 17.2.
The Shanghai Composite has gained 1.3 percent over the past month, narrowing this year’s slump to 3.9 percent, as reports on manufacturing and industrial earnings signal the economy is bottoming. The gauge trades at 9.7 times estimated profit, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006.
“Investors are not that much concerned about the conflicting data,’” Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Banking, which oversees about $207 billion, said in a phone interview. “If you look at all the data, there is improvement and that’s more important. I would take this as an opportunity to accumulate, rather than as a signal to sell.”
Hu Deping, the son of China’s late Communist Party chief Hu Yaobang, called on leaders of the world’s most populous nation to pursue political and economic changes on the eve of the leadership transition. The nation’s central bank said on Nov. 2 the economy is expected to maintain “steady and relatively rapid growth” as earlier government policies to support expansion take effect.
The People’s Bank of China’s quarterly monetary policy report suggests policy easing will continue and may even pick up speed, Zhang Zhiwei, Nomura Holdings Inc.’s chief China economist, wrote in a report e-mailed on Nov. 2.
Jiangxi Copper, the nation’s biggest producer of the metal, slid 1.7 percent to 21.23 yuan. Yunnan Copper Industry Co. slumped 1.2 percent to 15.40 yuan.
Copper for delivery in three months lost 0.5 percent to $7,634.75 a metric ton on the London Metal Exchange today. The Thomson Reuters/Jefferies CRB Index of raw materials retreated 1.6 percent on Nov. 2, the biggest drop in a month. Hedge funds cut bullish wagers on commodities by the most since June as prices retreated to a three-month low on mounting concern that Europe’s debt crisis will worsen and U.S. growth slow.
Kweichow Moutai, which jumped a combined 13 percent in September and October, lost 2.2 percent to 242.92 yuan today. Wuliangye Yibin Co.. the second-largest baijiu maker, retreated 2.2 percent to 33.69 yuan. Investors are selling shares of the liquor makers because of speculation fourth-quarter sales may be disappointing and on concern recent rallies were excessive, said Wang Ping, a Great Wall Securities Co. analyst in Shenzhen.
BYD, an electric-car maker that is part-owned by Warren Buffett’s Berkshire Hathaway Inc., advanced 3.3 percent to 15.20 yuan. Shanghai has submitted its subsidy plan for new energy vehicles to the National Development and Reform Commission, the Oriental Morning Post reported today, citing an unidentified official with the local government.
The cost of protecting against losses in Chinese stocks relative to U.S. equities fell to a one-year low on prospects the slowdown in the world’s second-largest economy will ease. The AlphaShares Chinese Volatility Index, derived from options on companies listed in Hong Kong, traded at 18.61 on Oct. 31, 1 percentage point above the Chicago Board Options Exchange Volatility Index and the smallest gap since September 2011. The premium has narrowed from as much as 1.43 percent on Sept. 9.
The iShares FTSE China 25 Index Fund (FXI:US), the biggest Chinese exchange-traded fund in the U.S., gained 1.4 percent last week.
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