Chinese Stocks Fall to Seven-Week Low on FDI Drop; Banks Slide

Chinese stocks fell, with trading volume on the benchmark index plunging to the lowest level in almost a year, after foreign direct investment in China dropped.

China Construction Bank Corp. (939) slumped 1.2 percent, pushing a gauge of financial companies to the second-steepest loss among industry groups in the CSI 300 (SHSZ300) Index. Ping An Insurance Group Co. (2318) slid 3.2 percent as Bank of Communications Co. said HSBC Holdings Plc’s possible sale of Ping An shares may hurt investor sentiment. Anhui Water Resources Development Co. jumped the most in three weeks after the China Securities Journal reported the nation’s investment in water conservation will increase.

“The foreign direct investment decline shows the economy isn’t doing that well,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “Investors need another quarter to verify if the economy has started to recover and are waiting for policy actions from the new leadership.”

The Shanghai Composite Index (SHCOMP) lost 0.4 percent to 2,008.92, the lowest close since Sept. 26. It earlier rose as much as 0.3 percent. Trading volumes slumped to the lowest level since Dec. 12, 2011, according to data compiled by Bloomberg. The CSI 300 fell 0.5 percent to 2,164.88.

The Shanghai index trades at 9.6 times estimated profit for 2012 after losing 8.7 percent this year, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006. The measure briefly fell below the 2,000 level yesterday for the second time in almost eight weeks.

“A level of 2,000 is really psychological, but not a real key support,” Tacky Cheng, a Hong Kong-based technical analyst at Nomura Holdings Inc., said in e-mailed comments today. “Primary support is 1,945,” he said.

FDI Report

The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 0.3 percent today. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, advanced 2.2 percent in New York. Sales of previously owned U.S. homes climbed in October, while confidence among U.S. homebuilders unexpectedly gained in November to a six-year high.

Foreign direct investment in China fell 0.2 percent in October to $8.31 billion from a year earlier, an 11th decline in 12 months, the Ministry of Commerce said. Investment in the first 10 months of the year dropped to $91.7 billion, the ministry said in a statement.

A gauge of Chinese banks, brokerages and insurers in the CSI 300 slid 0.7 percent, the most among 10 industry groups.

China Construction Bank, the second-biggest lender, slumped 1.2 percent to 4.16 yuan. Industrial & Commercial Bank of China (601398) Ltd., the largest lender, slid 0.5 percent to 3.83 yuan.

Reserve Requirements

China may refrain from cutting lenders’ reserve requirements for the rest of the year, according to economists surveyed by Bloomberg News. The People’s Bank of China will probably keep the reserve-requirement ratio for large lenders at 20 percent, based on the median estimate of economists in a Bloomberg survey conducted Nov. 14-19. That compares with the half-point cut projected last month and the full point forecast in September.

Ping An declined 3.2 percent to 35.33 yuan. HSBC’s possible sale of its shares in Ping An would impact investor sentiment as the bank has been a strategic partner of the Chinese insurer, Bank of Communications analyst Li Wenbing said in a report.

Charoen Pokphand Group, controlled by Thai billionaire Dhanin Chearavanont, may pay HK$60 for each Hong Kong-listed Ping An share owned by HSBC, the Shanghai Securities News reported today, citing an unidentified person. Ping An’s Hong Kong shares slipped 1 percent to HK$57.85.

Water Stocks

Anhui Water jumped 3.1 percent to 10.63 yuan, while Chongqing Three Gorges Water Conservancy & Electric Power rose 0.9 percent to 11.77 yuan.

China’s investment in water conservation this winter and next spring will rise by more than 15 percent to more than 336.4 billion yuan ($54 billion), the China Securities Journal reported, citing Minister of Water Resources Chen Lei.

Trading volumes on the Shanghai index were 35 percent lower than the 30-day average today, according to data compiled by Bloomberg. Thirty-day volatility was at 12.5, compared with this year’s average of 17.1.

The Shanghai Composite slid 2.6 percent last week as the Communist Party held a meeting to appoint new leaders. Xi Jinping was named general secretary, putting him in line to become president.

“There’s still uncertainty about the direction that the new administration is going in,” Timothy Ghriskey, chief investment officer at New York-based Solaris Group LLC, which manages about $2 billion of assets including Chinese stocks, said by phone yesterday. “Investors are sort of holding back now as they would want to see actually what happens in actions, not just in words.”

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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