China’s stocks fell to the lowest level in a week after a report showed producer prices declined the most since 2009 and companies from ZTE (000063) Corp. and Yunnan Copper Industry Co. (000878) estimated third-quarter losses.
ZTE, China’s second-biggest phone-equipment maker, plunged 10 percent and Yunnan Copper, the nation’s fourth-biggest producer of the metal, retreated 2.4 percent. Chinese producer prices dropped 3.6 percent last month, accelerating from a 3.5 percent decline in the previous month. Concerns about deflation and lending overshadowed reports showing China’s exports and money supply rose more than estimated in September.
“Forthcoming third-quarter earnings will be a major factor weighing on the market and the numbers aren’t great,” said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai, which oversees $285 million. “The weak PPI number casts a question mark over the economic recovery. There’s no rationale for aggressive buying.”
The Shanghai Composite Index (SHCOMP) fell 0.3 percent to 2,098.70 at the close. The CSI 300 Index (SHSZ300) slid 0.4 percent to 2,294.86. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong added 0.4 percent. The Bloomberg China-US 55 Index (CH55BN) of the most-traded Chinese companies in the U.S. rose 0.1 percent in New York on Oct. 12.
Even with today’s loss, the Shanghai Composite has rebounded 4.7 percent since reaching a three-year low on Sept. 26 on expectations regulators will introduce measures to stabilize the market ahead of a once-in-a-decade power transition of the Communist Party in November. The gauge is valued at 9.8 times estimated earnings, compared with the 17.9 average since Bloomberg began compiling the weekly data in 2006.
The decline in producer prices exceeded the median estimate of a 3.5 percent drop in Bloomberg survey of 31 economists. Consumer prices rose 1.9 percent last month, close to the slowest pace in two years, the statistics bureau said today.
“Inflation data continues to point to slack demand, with industrial prices contracting at a rapid pace,” Alistair Thornton, an economist with IHS Global Insight in Beijing, wrote in a report.
Chinese banks extended 623.2 billion yuan ($99.5 billion) of local-currency loans in September, the People’s Bank of China said on its website on Oct. 12 after the market closed. That compares with the median estimate of 700 billion yuan in a Bloomberg News survey of economists.
“Credit supply in September was below expectations, mainly a reflection of the People’s Bank of China’s cautious approach towards policy loosening,” Yu Song and Yin Zhang, economists at Beijing Gao Hua Securities Co., said in a report.
ZTE tumbled by the daily limit of 10 percent to 9.45 yuan. The company said it may post a third-quarter loss of as much as 2 billion yuan after delays in some overseas projects and collective purchasing by local carriers.
Yunnan Copper fell 2.4 percent to 16.13 yuan after estimating a third-quarter loss of 307.8 million yuan.
Yunnan Aluminium Co. (000807), China’s fifth-largest producer of the light metal, lost 2.1 percent to 5.09 yuan. The company said its third-quarter loss may be between 4 million yuan and 5.5 million yuan.
China’s exports increased 9.9 percent from a year earlier in September, the customs administration said Oct. 13 in Beijing. That was more than the 5.5 percent median estimate in a Bloomberg News survey of economists. M2 money supply gained 14.8 percent, the fastest pace since June 2011, a central bank report showed the same day.
The economy probably expanded 7.4 percent in the three months ended Sept. 30, the slowest pace in more than three years, according to the median estimate of 37 analysts surveyed by Bloomberg. The GDP report and September data for industrial production, fixed-asset investment and retail sales are due on Oct. 18.
A gauge of consumer staples stocks in the CSI 300 rose 0.8 percent, the second-biggest gain among the 10 industry groups.
Wuliangye Yibin Co. (000858), the nation’s second-biggest maker of baijiu liquor, surged 3.9 percent to 34.67 yuan. The company expects third-quarter net income to rise by as much as 90 percent and net income for the first nine months to rise by as much as 62 percent, according to an exchange statement.
Kweichow Moutai Co. (600519), China’s biggest producer of baijiu liquor by market value, added 0.9 percent to 245.71 yuan. Luzhou Laojiao Co., a sprits producer in the province of Sichuan, climbed 3 percent to 39.50 yuan.
Thirty-day volatility in the Shanghai Composite was at 19.9 today, compared with this year’s average of 17.1. About 5.3 billion shares changed hands in the gauge, 31 percent lower than the daily average in 2012.
Chinese companies traded on the mainland are priced at the smallest premium to Hong Kong-listed counterparts in eight months. Yuan-denominated A shares in Shanghai and Shenzhen are only 1 percent more expensive than their dual-listed counterparts in Hong Kong, according to an index from Hang Seng Bank Ltd. That premium is the narrowest since Feb. 17 and compares with 23 percent a year ago.
--Zhang Shidong. Editors: Allen Wan, Chan Tien Hin
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