China’s Stocks Drop From Four-Month High, Trimming Gain

China’s stocks fell from a four- month high, led by financial companies, on concern a rally that has lifted shares from an almost four-year low is excessive.

China Minsheng Banking Corp. led declines for lenders after the shares jumped to a two-year high this month. Poly Real Estate (600048) Group Co., the second-biggest property developer, dropped 1.5 percent after the China Securities Journal said the government may introduce new housing curbs. Datong Coal Industry Co., China’s third-largest coal company by capacity, advanced 1 percent as the government said it will restrict the output of some types of coal, boosting speculation prices may rise.

“There’s some profit taking after a round of decent gains and the market is taking a breather here,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “But the momentum is there and the rally may extend further.”

The Shanghai Composite Index (SHCOMP) retreated 0.7 percent to 2,153.31 at the close, trimming this week’s gain to 0.1 percent. It finished at the highest since Aug. 10 yesterday. The CSI 300 Index (SHSZ300) lost 0.5 percent to 2,372, while the Hang Seng China Enterprises Index (HSCEI) slid 1.1 percent. The Bloomberg China-US 55 Index (CH55BN) added 0.5 percent in New York yesterday.

The Shanghai Composite has risen 9.9 percent since Dec. 3, when it closed at its lowest level since January 2009, on signs the economic recovery is gathering momentum. The measure trades at 10.5 times estimated earnings, the highest since May, according to weekly data compiled by Bloomberg.

The 14-day relative strength measure for the Shanghai Composite, measuring how rapidly prices have advanced or dropped during a specified time period, was at 69.4 yesterday. Readings above 70 indicate a price may be poised to fall.

Banks Drop

The Shanghai index fell 2.1 percent this year. Trading volumes were 38 percent higher today than the 30-day average this year. Thirty-day volatility was at 20.1, compared with this year’s average of 17.

A measure of financial stocks in the CSI 300 sank 0.9 percent, the third most among the 10 industry groups. Minsheng Banking fell 1.4 percent to 7.33 yuan, paring this year’s gain to 24 percent. China Construction Bank Corp. (601939), the country’s second-largest bank, lost 2.7 percent to 4.41 yuan.

China Vanke Co., the biggest developer, lost 0.5 percent to 9.43 yuan. Poly Real Estate slipped 1.5 percent to 12.12 yuan. China Merchants Property Development Co., the third largest, slid 1.6 percent to 25.97 yuan.

China “won’t rule out the possibility” of introducing new housing curbs after the property market rebounded in November and some regions saw “irrational exuberance,” the China Securities Journal reported today, citing an unidentified person in the industry.

Growth Outlook

New home prices climbed in 53 of the 70 cities from the previous month in November, compared with 35 in October, the National Bureau of Statistics said on Oct. 18. That was the most in 18 months.

China’s swap market is the most bullish on the world’s second-largest economy in 18 months amid signs of a rebound from a seven-quarter slowdown. The World Bank estimated this week that economic growth will rebound to 8.4 percent in 2013, from a 13-year low of 7.9 percent in 2012, as earlier monetary easing takes effect and local governments boost spending.

Optimism for an economic rebound is helping attract funds and strengthen the yuan. Qualified foreign institutional investors purchases of stocks listed on the Shanghai Stock Exchange have risen since August, the China Securities Journal reported today, citing data from the China Securities Regulatory Commission. Net stock purchases were three times those of the January-July period, it said.

Coal Stocks

Datong Coal rose 1 percent to 9.03 yuan. Guizhou Panjiang Refined Coal Co. (600395) climbed 2.3 percent to 16.69 yuan. Shanxi Lanhua Sci-Tech Venture Co. added 0.8 percent to 19.70 yuan.

China requires the efficient use of special and rare coal including coking and anthracitic coal and forbids waste, according to a statement posted on the National Development and Reform Commission’s website.

Power-station coal in Asia is poised to rebound in 2013 from the steepest annual decline in seven years as utilities in China and the U.S. burn more of the fuel to feed their growing economies. Thermal coal at the Australian port of Newcastle may average $98 a metric ton next year, according to the median estimate of seven analysts in a Bloomberg survey this month.

In the U.S., House Republican leaders canceled a planned vote on Speaker John Boehner’s plan to raise rates for taxpayers making more than $1 million. Fewer than two weeks remain to avert more than $600 billion in automatic spending cuts and tax increases, known as the fiscal cliff, set to start in January.

The U.S. is China’s second-largest export market, making up about 17 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

Chinese stocks rose in New York yesterday, led by SouFun Holdings Ltd. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., climbed 0.7 percent to $39.75, the highest price in nine months. The ETF has risen 14 percent this year.

--Zhang Shidong. 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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.