Chinese Stocks Drop to One-Month Low; Yanzhou Coal Paces Losses

Chinese stocks fell, dragging the benchmark index to a one-month low, as weaker earnings from companies including Yanzhou Coal Mining Co. (600188) outweighed better- than-estimated figures from China Petroleum & Chemical Corp. (600028)

Yanzhou Coal, China’s fourth-largest miner of the fuel, lost 1 percent after posting a loss in the three months to Sept. 30. Weichai Power Co. (000338), a maker of high-speed heavy-duty diesel engines, sank 2.1 percent after profit decreased. China Petroleum, Asia’s biggest oil refiner and also known as Sinopec, added 1.1 percent.

“Earnings are the focus of the market now and investors give premiums to companies whose profits can exceed expectations,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “There will be little movement on the index as there are few catalysts for buying stocks.”

The Shanghai Composite Index (SHCOMP) fell 0.4 percent to 2,058.94 at the close, its lowest level since Sept. 27. About six stocks dropped for every five that rose on the gauge. The CSI 300 Index (SHSZ300) slid 0.5 percent to 2,235.85. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong added 0.7 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, fell 1.8 percent in New York on Oct. 26.

About 24 percent fewer shares of Shanghai Composite companies changed hands today compared with the 30-day average, according to data compiled by Bloomberg. U.S. equity markets will close today as Hurricane Sandy approaches New York City, the Securities and Exchange Commission said in a statement.

Quarterly Earnings

Yanzhou Coal lost 1 percent to 17.53 yuan. The coal producer posted a net loss of 79.6 million yuan ($12.7 million) in the third quarter, it said in a filing to the Hong Kong stock exchange on Oct. 26. The loss compared with a profit of 1.08 billion yuan a year earlier.

Weichai Power slumped 2.1 percent to 19.46 yuan after profit dropped 53 percent from a year earlier in the third quarter.

The Shanghai Composite sank 2.9 percent last week, its first drop in four weeks, as companies including Maanshan Iron & Steel Co. (600808) and ZTE Corp. reported losses. The index trades at 9.7 times estimated earnings for 2012, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006. The Shanghai gauge has lost 6.4 percent this year.

Sinopec Profit

Sinopec added 1.1 percent to 6.24 yuan. Third-quarter net income fell 9.4 percent to 18.3 billion yuan, the company said yesterday in a statement. That beat the 14.19 billion-yuan median estimate of nine analysts surveyed by Bloomberg.

Net income for industrial companies rose 7.8 percent from a year earlier to 464.3 billion yuan last month, the National Bureau of Statistics said. That compared with a 6.2 percent decline in August, the year’s largest drop.

China is studying a differentiated tax system on stock dividends based on the length of shareholding, the China Securities Journal reported today, citing unidentified people.

For shares held over 12 months, the tax rate may be “significantly” reduced and the differentiated tax is aimed at encouraging long-term investments, according to the report.

Some 505 companies in the Shanghai Composite have reported third-quarter earnings with an average drop of 1 percent from a year earlier, according to data compiled by Bloomberg. Publicly traded companies are required to release results by the end of the month.

Bubble Peak

Five years after global equities peaked, valuations in developing countries have tumbled the most even as their economies expanded fastest.

The MSCI Emerging Market Index’s price-to-book ratio has dropped 47 percent since October 2007, compared with declines of 41 percent for Japan’s Nikkei 225 Stock Average, 38 percent for the Stoxx Europe 600 Index and 27 percent in the Standard & Poor’s 500 Index.

China-focused equity funds received $913 million of inflows for the week ended Oct. 24, the most since July 2008, Cambridge, Massachusetts-based data provider EPFR Global said in an e-mail Oct. 26.

Thirty-day volatility in the Shanghai Composite was at 17.2 today, matching this year’s average. About 5.4 billion shares changed hands in the gauge, 29 percent lower than the daily average in 2012.

--Zhang Shidong. Editors: Richard Frost, Ravil Shirodkar

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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