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Most China Stocks Drop Before Industrial Output, Inflation Data

Most Chinese stocks fell before the release of factory output and inflation data tomorrow. Losses for property developers and industrial companies overshadowed better-than-estimated trade data.

China Vanke Co., the biggest developer, and shipbuilder China CSSC Holdings Ltd. (600150) dropped at least 1.9 percent. Shenzhen Energy Group Co. slid the most in six weeks after it denied a newspaper report that a unit had set up an online brokerage with Tencent Holdings Ltd. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111) climbed 1.6 percent after the government said it will crack down on illegal exploration of the metal.

About four stocks dropped for every three that gained on the Shanghai Composite Index (SHCOMP), which fell 0.1 percent to 2,044.90 at the close. Data today showed China’s exports rose 5.1 percent in July, while imports advanced 10.9 percent.

“The market is focused on policy reforms these days rather than economic data,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees $3.3 billion in assets. “Unless the economic data far exceed or trail estimates, the market won’t respond too much.”

The CSI 300 Index slipped 0.2 percent to 2,276.78. The Hang Seng China Enterprises Index (HSCEI) gained 0.6 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 1.2 percent in New York yesterday.

The Shanghai Composite trades at 8.3 times 12-month projected earnings, compared with the five-year average of 12.7 times, according to data compiled by Bloomberg. Trading volumes were 12 percent lower than the 30-day average today. The index has slumped 9.9 percent this year on concern growth in the world’s second-largest economy is slowing.

Economic Data

A gauge of industrial companies lost 0.7 percent, the most among the 10 groups in the CSI 300. China CSSC, a unit of the nation’s biggest shipbuilder, slid 2.8 percent to 17.12 yuan. Vanke, the nation’s biggest listed property developer, fell 1.9 percent to 9.79 yuan. A measure of developers in the Shanghai index declined 0.5 percent, the most among the five groups.

Inflation probably quickened to 2.8 percent last month from 2.7 percent in June, while growth in industrial output may remain unchanged at 8.9 percent from a month earlier, according to Bloomberg surveys.

The government has signaled that it will defend its 7.5 percent economic-growth target for the year after expansion slowed for a second quarter. China last month announced measures to support the economy such as ordering companies in 19 industries to curb overcapacity as well as tax cuts for small firms and aid to exporters.

China’s shipments abroad compared with the median estimate for a 2 percent increase in a Bloomberg News survey of 45 analysts and June’s 3.1 percent drop. The increase in imports compares with the median estimate for a 1 percent gain and a 0.7 percent decline in June.

Rare Earth

“We expect better trade activity to only partially offset weak domestic demand due to tighter credit conditions” in the second half, and growth will keep decelerating over the next few quarters, Ding Shuang, economist at Citigroup Inc., wrote in a note.

Shenzhen Energy tumbled 3.5 percent to 5.48 yuan, its biggest loss since June 24. The company denied yesterday’s report from National Business Daily that Great Wall Securities, in Shenzhen Energy has a 13.1 percent stake, set up online brokerage with Tencent and is applying for license, according to an exchange statement.

Baotou Rare-Earth gained 1.6 percent to 25.60 yuan. China Minmetals Rare Earth Co. (000831) added 1.6 percent to 23.99 yuan. Local governments were asked to crack down on illegal exploration of rare earth from Aug. 15 to Nov. 15, according to a statement posted on the website of the Ministry of Industry and Information Technology. Rare-earth companies will be ordered to halve production should output exceed plans, it said.

A measure of technology stocks surged 2 percent for the biggest gain among the CSI 300’s groups. The gauge rose its highest level since August 2011 on Aug. 6 before slumping 2.7 percent yesterday. GoerTek Inc. (002241), an Apple Inc. supplier, jumped 10 percent to 42.64 yuan. Chengdu Dr Peng Telecom & Media Group Co. (600804) surged 5.1 percent to 17.24 yuan.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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