China’s Stocks Fall to 14-Week Low as Avian Flu Offsets Data

Photographer: Tomohiro Ohsumi/Bloomberg

A customer exits an Industrial and Commercial Bank of China Ltd. (ICBC) bank branch at night in Shanghai. Industrial & Commercial Bank of China Ltd. gained 0.7 percent after saying it plans to buy 20 percent of Taiwan’s Bank Sinopac. Close

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Photographer: Tomohiro Ohsumi/Bloomberg

A customer exits an Industrial and Commercial Bank of China Ltd. (ICBC) bank branch at night in Shanghai. Industrial & Commercial Bank of China Ltd. gained 0.7 percent after saying it plans to buy 20 percent of Taiwan’s Bank Sinopac.

China’s stocks dropped to a 14-week low as concerns over a new strain of avian flu overshadowed data showing growth in the nation’s services industries.

Beijing Dabeinong Technology Group Co. (002385), which makes animal feed, sank to a more than three-month low as Shanghai issued an alert over the bird flu strain that has killed two people in the city. Wintime Energy Co. (600157) was the third-biggest drag on the benchmark index because of a share-sale plan. Hualan Biological Engineering Inc. (002007) led gains by drug makers. Industrial & Commercial Bank of China Ltd. increased 0.7 percent on plans to buy 20 percent of Taiwan’s Bank Sinopac.

The Shanghai Composite Index (SHCOMP) closed 0.1 percent lower at 2,225.3, the lowest level since Dec. 27. More than two stocks fell for each one that rose. The gauge lost 0.5 percent this week, a second weekly loss. Markets will be shut the next two days for holidays. The CSI 300 Index declined 0.1 percent to 2,483.55.

“Stock valuations are low and the economy has halted its decline in growth,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “From these two aspects, stocks are cheap and don’t have a big room for declines. Bird flu is a good thematic investment especially when the market has no clear direction.”

Thirty-day volatility on the Shanghai Composite sank to a two-week low of 21.8, while the gauge’s trading volumes were 25 percent higher than the 30-day average today, according to data compiled by Bloomberg.

Lower Volatility

The Shanghai index slumped 8.6 percent from a Feb. 6 high amid concern steps to cool property prices will drag on economic growth and as company earnings trailed estimates. Valuations on the gauge sank to 9.1 times projected 12-month earnings, the lowest level since Dec. 13 and less than the seven-year average of 15.8, data compiled by Bloomberg show

The non-manufacturing Purchasing Managers’ Index, a gauge of the nation’s services industries, rose to 55.6 from 54.5 in February, the National Bureau of Statistics and China Federation of Logistics and Purchasing reported today. Readings above 50 signal expansion. A separate services gauge from HSBC Holdings Plc and Markit Economics rose to 54.3 from 52.1.

The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong lost 0.5 percent today. The Bloomberg China- US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.7 percent yesterday.

Beijing Dabeinong sank 1.9 percent to 20.70 yuan, its lowest close since Dec. 21, on speculation the bird-flu strain will lower demand for its products. Henan Shuanghui Investment & Development Co. (000895), which manufactures pork products, slumped 5.7 percent to 72.60 yuan. New Hope Liuhe Co., an animal feed producer, slid 3.4 percent to 11.36 yuan.

Avian Flu

Hualan Biological jumped 6.5 percent to 26.15 yuan, while China Animal Husbandry Industry Co. (600195), which makes animal vaccines, gained 3.2 percent to 13.64 yuan. The two bird-flu deaths in Shanghai were among at least seven infected in eastern China.

Shanghai issued a level-3 flu alert, the second-lowest stage of four levels. Municipal authorities will strengthen monitoring of influenza and will require daily reporting of pneumonia cases where the causes are unknown, Xu Jianguang, head of Shanghai’s health and family planning commission, said at a briefing yesterday.

Wintime Energy plunged 10 percent to 10.93 yuan, as it traded for the first time since Feb. 19. Its board approved plan to issue shares for the purchase of coal assets.

ICBC (601398) gained 0.7 percent to 4.09 yuan. The company said it plans to buy 20 percent of Taiwan’s Bank Sinopac for $670 million in the first mainland investment in a lender on the island.

Government Support

New loans may be 1 trillion yuan ($161.3 billion) in March based on estimates that new lending by the four biggest banks was about 331 billion yuan, the Shanghai Securities News reported today, citing Shenyin & Wanguo Securities Co. New lending was 1.07 trillion yuan in January and 620 billion yuan in February.

China CSSC Holdings Ltd. (600150), a unit of the nation’s biggest shipbuilder, rose 2.7 percent to 19.69 yuan, while Guangzhou Shipyard International Co. added 1.4 percent to 11.59 yuan. The government will issue measures in the near term to support the development of the ship-building industry for the three years through 2015, the China Securities Journal reported today, citing an industry association.

GD Midea Holding Co. (000527), an appliance maker, surged 10 percent to 12.22 yuan. The stock climbed by the daily limit for a third day after its parent announced a plan to buy out the company.

Lower Profit

Publicly traded companies in China are required to release annual and first-quarter reports by the end of April. The 539 companies in the Shanghai Composite that have announced 2012 earnings reported average growth of 3.8 percent, down from 14 percent a year earlier, according to data compiled by Bloomberg.

The Bloomberg China-US Equity Index rallied yesterday after its average valuation dropped to a four-month low of 12.6 times estimated earnings on April 1. The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., was little changed at $36.49.

“Chinese stocks are really cheap now, a buy opportunity as we had last year when valuations reached lows in history,” said Michael Ding, lead manager of the China Region Fund at U.S. Global Investors Inc. in San Antonio, Texas. His firm oversees $2.2 billion.

--Zhang Shidong. Editors: Darren Boey, Chan Tien Hin

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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