China Stocks Fall for Second Day; Financial Shares Lead Retreat

China’s stocks fell for a second day, dragging the benchmark index down to the lowest level in almost a week.

Citic Securities Co. led declines for financial shares after industry data showed brokerage profits slumped 16 percent last year. North Navigation Control Technology Co. dropped the most in three months after gaining 64 percent during an eight- day rally on speculation increased demand will boost earnings. Sichuan Changhong Electric Co. slid after cancelling a plan to buy a stake in Guohong Communication Digital Group Co.

The Shanghai Composite Index (SHCOMP) dropped 0.5 percent to 2,297.86 at 9:38 a.m. local time, while the CSI 300 Index (SHSZ300) lost 0.5 percent to 2,564.64. The Shanghai index fell yesterday on concerns shares are overbought after rallying 18 percent from an almost four-year low on Dec. 3 amid speculation economic growth is picking up. Data on gross domestic product and industrial output are scheduled to be released tomorrow.

“Investors are just finding excuses to take some profits after the gauge rose for a while,” said Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai. “It won’t fall too much, there’s just some fluctuations around 2,300. We need new factors to drive the gauge higher. For instance, if the data tomorrow are better-than-estimated, it would boost the market.”

The Shanghai measure traded at 12.8 times reported earnings yesterday, the highest since May, according to data compiled by Bloomberg. Average trading volumes in the Shanghai index were 37 percent higher than the 30-day average yesterday. Thirty-day volatility was at 21.4, compared with last year’s average of 17.1.

Tomorrow’s Data

The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong added 0.3 percent today. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, lost 0.6 percent in New York.

China’s economy is set to exit a seven-quarter slowdown as the government rolls out infrastructure projects and limited inflation allows officials hold off from tightening monetary policy.

The National Bureau of Statistics will report tomorrow that gross domestic product expanded 7.8 percent in the fourth quarter from a year earlier, according to the median estimate of 53 economists surveyed by Bloomberg News. That’s up from a three-year low of 7.4 percent in the previous period.

Factory output probably rose 10.2 percent in December from a year earlier, up from 10.1 percent in November, while retail sales advanced 15.1 percent after a 14.9 percent gain the prior month, according to median analyst estimates.

Bank Loans

With new loans for the four biggest Chinese banks about 270 billion yuan ($43.4 billion) in the first two weeks of January, total new loans for the month may rise to as much as 1.35 trillion yuan, up 83 percent from last year, Barclays Plc said.

Overall monetary conditions remain very accommodative, Barclays analysts May Yan, Sean Hung and Mimi Kong said in a report dated yesterday. Barclays named ICBC, Bank of China Ltd. and Bank of Communications Co. as top Chinese bank picks.

Foreign institutional investors have stabilised China’s stock market, Sina.com reported, citing Guo Shuqing, chairman of the China Securities Regulatory Commission. Guo cited reforming IPO markets, reducing administrative approvals and improving delistings in the Shanghai Securities News, without elaborating.

Chinese regulators are accelerating approvals for overseas firms to buy the country’s securities at a record pace as local investors abandon equities. The State Administration of Foreign Exchange awarded $15.8 billion of quotas for qualified foreign institutional investors to trade stocks and bonds in 2012, according to regulatory data compiled by Bloomberg. That’s more than the previous five years combined.

-- Editors: Allen Wan, Darren Boey

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

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.