China’s Stocks Decline, Paring Biggest Monthly Gain

China’s stocks fell for the first time in five days, paring the benchmark index’s biggest monthly gain this year. Property and technology shares led declines before the release of manufacturing data this weekend.

Gemdale Corp. slumped 1.1 percent, pacing a retreat for developers, after the 21st Century Business Herald reported Beijing will take measures to limit home prices. Sinovel Wind Group Co. slid the most in almost a month after the company said it’s under investigation by Chinese regulators. Henan Shuanghui Investment & Development Co. jumped the most in two years after its parent company agreed to acquire Smithfield Foods Inc.

The Shanghai Composite Index (SHCOMP) fell 0.3 percent to 2,317.75 at the close. The index has gained 6.4 percent in May, the most since December 2012. The CSI 300 Index lost 0.3 percent to 2,634.32. The Hang Seng China Enterprises Index fell 0.7 percent. The Bloomberg China-US Equity Index slid 1.6 percent.

“Investors are waiting for more reforms or economic reports like Saturday’s manufacturing data to create more drivers for blue-chip stocks,” said Sun Zheng, an investment adviser with Dongxing Securities Co. “We are cautious, which explains why the index has been fluctuating between positive and negative territory these days. Technology stocks have risen a lot so it’s just profit-taking now.”

The Shanghai index has rebounded 6.6 percent from this year’s low set on May 2 after interest-rate cuts by central banks around the world spurred capital inflows and Chinese policymakers accelerated reforms of the economy by allowing private investment in industries such as telecommunications.

PMI Data

The Shanghai Composite trades at 9.5 times 12-month estimated earnings, compared with a seven-year average of 15.5 times, according to data compiled by Bloomberg. Trading volumes were 14 percent above the 30-day average today, while 30-day volatility was at 16, compared with this year’s average of 19.4, data compiled by Bloomberg show.

The government is scheduled to release results of its official manufacturing index for May on June 1. The reading is estimated to be 50, down from the previous month’s 50.6, according to the median estimate of 27 economists. A preliminary reading by HSBC and Markit’s Purchasing Managers Index last week was 49.6, below the 50 level that divides expansion and contraction.

A gauge of property stocks in the Shanghai index fell 0.6 percent, the most among five industry groups. Gemdale retreated 1.1 percent to 8 yuan. Even with today’s drop, the property measure is up 11 percent this month, the most among the groups.

China Acquisition

Beijing will likely cap home prices on a “larger scale” in the second half, 21st Century Business Herald reported today, without citing anyone. The city may set housing prices before the land is sold, according to the report.

A measure of technology stocks in the CSI 300 slid 1.1 percent, paring this month’s gain to 19 percent. Sanan Optoelectronics Co. fell 2.8 percent to 19.93 yuan, trimming the May rally to 42 percent. Neusoft Corp. dropped 0.4 percent to 8.97 yuan today.

Sinovel Wind lost 3.1 percent to 5.58 yuan. The company received a notice from China Securities Regulatory Commission on the decision to start the probe and will cooperate, according to a filing to the Shanghai Stock Exchange yesterday. Sinovel in March revised down its 2011 profit by 22 percent to 607.4 million yuan ($99.1 million) due to an accounting error.

Henan Shuanghui jumped 8.7 percent to 42.86 yuan, the biggest advance since Dec. 7, 2010. Shuanghui International Holdings Ltd., China’s biggest pork producer, agreed to acquire Smithfield for about $4.72 billion to boost supplies for the nation that’s the biggest consumer of the meat. Sichuan Gaojin Food Co., a Shenzhen-listed maker of pork products, gained 0.9 percent to 5.48 yuan.

-- With assistance from Belinda Cao in New York. Editors: Allen Wan, Chan Tien Hin

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

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