China Stocks Fall on Home Price Slump, North Korea Leader Death
Dec. 19 (Bloomberg) -- Thomas Murphy, managing partner at private wealth-management firm Family Office Research & Management Ltd. in Sydney, talks about China's economy, central bank monetary policy and stock market. Murphy also discusses Europe's sovereign debt crisis and its implications for the region's banking industry. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
China’s stocks retreated, pushing the benchmark index towards a seventh week of losses, after home prices posted their worst performance this year and North Korean leader Kim Jong Il died.
China Cosco Holdings Co., which ships goods to Europe, slid 1.9 percent after Fitch Ratings warned it may cut the credit ratings of European nations. China Life Insurance Co. (601628), which owns shares in Chongqing Brewery Co. (600132), fell to a two-month low as a plunge in the beermaker’s shares may hurt investment returns. BYD Co., partly owned by Warren Buffett’s Berkshire Hathaway Inc, climbed the most in a month after the government said a vehicle tax may not apply to autos using alternative energy.
“The Chinese economy will continue to slow down in the first and second quarters next year and investors’ confidence is weak,” said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co. “The North Korea news may boost geopolitical tensions. It is unknown what policies the younger generation will enact as they come to power.”
The Shanghai Composite Index (SHCOMP) fell 6.61 points, or 0.3 percent, to 2,218.24 at the close. The CSI 300 Index (SHSZ300) lost 0.2 percent to 2,384.41. Stocks trimmed losses of as much as 2.7 percent in the final hour of the trading. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.8 percent in New York on Dec. 16.
Asian stock markets extended declines, with South Korea’s Kospi index falling 3.4 percent, after the Korean Central News Agency reported Kim died on Dec. 17 of exhaustion brought on by a sudden illness. China is North Korea’s closest ally.
‘Not Loved’
“Although he was not loved, maybe his disappearance just led to fears of even greater instability,” said Gerald Ambrose, who manages $2 billion in assets as managing director at Aberdeen Asset Management Sdn. in Kuala Lumpur. “There might be some concerns about what China’s intentions are now that Kim Jong Il is gone. Kim Jong Il’s son was being groomed for leadership but he didn’t show a lot of charisma.”
The Shanghai Composite slid 3.9 percent last week, dropping for a sixth week, as reports showed money supply grew the least in a decade in November and manufacturing may contract for a second month. It has tumbled 21 percent in 2011, sending the estimated price-earnings ratio to a record low, as shipments to Europe slowed because of the region’s debt crisis and the government raised interest rates to curb inflation.
Chinese equities are at their “darkest time” and unlikely to see “big rebounds” in the short term as a lack of confidence overshadows “very low” valuations, according to Jing Ulrich, chairman of global markets for China at JPMorgan Chase & Co. The government may ease monetary policy next year in a “limited scale,” she said at a briefing in Beijing.
Property Curbs
China may start to “slowly” relax property curbs from the third quarter next year with property developers facing difficulties over the next six months, she said.
A gauge of property stocks rose 0.3 percent even as 22 companies dropped and eight advanced. Developer Shanghai Duolun Industry Co. slid 10 percent to 7.76 yuan. Poly Real Estate Group Co. gained 0.9 percent to 10.07 yuan.
Building material-related stocks fell on concern a slump in the property market will curtail construction demand. Anhui Conch Cement Co., China’s biggest cement maker, fell 0.5 percent to 15.11 yuan. Baoshan Iron & Steel Co. (600019), the listed unit of the second-biggest steelmaker, lost 0.2 percent to 4.71 yuan.
Chinese new home prices dropped from the previous month in 49 cities, or more than half of the 70 biggest cities monitored by the government, compared with 33 posting decreases in October, the national statistics bureau said in a statement on its website yesterday. Only five cities had gains in home prices, according to the statement.
Shanghai’s new home average price fell 21 percent in the week ended Dec. 18 from the previous week, property consultant Shanghai UWin Real Estate Information Services Co. said today.
Yuan Position
The nation will continue to “strictly” implement measures to curb speculative demand in the property market, the Beijing News reported yesterday, citing Zhang Ping, chairman of the National Development and Reform Commission.
Chinese central bank data signaled that capital flowed out of the nation for a second month in November. Yuan positions at financial institutions from foreign-exchange purchases were down 27.9 billion yuan ($4.39 billion) in November, People’s Bank of China data show. The figure declined a combined 52.8 billion yuan in the past two months, the first back-to-back drop since at least 2000.
China is unlikely to enact a large stimulus package amid a “healthy correction,” in economic growth, said Fan Gang, a former adviser to the central bank, over the weekend.
Fitch Warning
Fan described the recent slowing in China’s economy as a soft landing, saying it will continue next year. He predicted the economy will grow between 8.5 percent and 8.7 percent next year, with inflation between 3.5 percent and 4 percent.
China Cosco, the world’s largest operator of dry-bulk ships, dropped 1.9 percent to 5.25 yuan. China Shipping Development Co. (600026), a unit of China’s second-biggest sea-cargo group, lost 1 percent to 6.13 yuan. Cosco Shipping Co., a unit of the largest shipping company, slid 2.7 percent to 4.40 yuan.
Fitch Ratings put credit ratings for France, Belgium, Spain, Slovenia, Italy, Ireland and Cyprus under review for a downgrade, saying a “comprehensive” solution to Europe’s crisis is “technically and politically beyond reach.” Europe accounts for about 18 percent of China’s exports, according to Shenyin & Wanguo Securities Co.
China Life slumped 3.2 percent to 16.31 yuan, the lowest close since Oct. 28. China Life held 3.6 million shares, or a 0.7 percent stake, in Chongqing Brewery Co. as of the end of June, according to data compiled by Bloomberg.
Chongqing Brewery
Chongqing Brewery, a beermaker which also produces medicine, tumbled by the 10 percent daily limit for an eighth day today after resuming trading on Dec. 8. Chongqing Brewery’s final summary report on the clinical studies of its Hepatitis B vaccine may be released on April 6, the company said in a statement on Dec. 13.
“The company’s share price got too much a boost from investors’ expectation that its vaccine will work,” Wu Zhengwu, an analyst at AJ Securities, said in a phone interview from Shanghai. Chongqing Brewery’s shares had gained 32 percent this year before they resumed trade on Dec. 8.
BYD, the automaker part-owned by Warren Buffett’s Berkshire Hathaway Inc., jumped 6.6 percent to 22.86 yuan, the biggest gain since Nov. 15.
China will implement a new vehicle tax law starting Jan. 1 next year, according to a statement posted on the State Administration of Taxation website yesterday. The new law will omit or reduce taxes on vehicles using alternative energy, the statement said.
Yuan-denominated A shares are approaching a bottom and may gain between 15 percent and 20 percent next year, Michael Kurtz, chief Asian equity strategist at Nomura Holdings Inc., said at a press conference in Beijing today.
--Zhang Shidong. With assistance from Michael Wei in Shanghai and Gan Yen Kuan in Kuala Lumpur. Editors: Allen Wan, Darren Boey
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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