China Stocks Drop From 10-Week High as Material Producers Slump

China’s stocks fell for the first time in five days, led by material producers and steelmakers, after valuations for the benchmark index climbed to the highest level since June.

Aluminum Corp. of China Ltd. and Jiangxi Copper Co. declined at least 1.7 percent, sending a gauge of material producers to the biggest loss among industry groups. Baoshan Iron & Steel Co., the biggest-listed steelmaker, slipped after rallying yesterday on speculation steelmakers with excess land would benefit from government land reform. China Merchants Bank Co. gained 1.9 percent after raising 27.5 billion yuan ($4.5 billion) in the Shanghai portion of a rights offer.

The Shanghai Composite Index (SHCOMP) fell 0.2 percent to 2,122.43 at the close. The index’s 4-day gain was its longest stretch of gains in a month as signs of economic improvement boosted material stocks. China’s official manufacturing gauge jumped to a 16-month high in August, while a measure from HSBC Holdings Plc and Markit Economics showed the largest gain since 2010.

“The economic data has been good, but investors are still trying to see if we’ve bottomed, said Du Liang, an analyst from Shanxi Securities Co. ‘‘Stocks are likely to fall in the near term as there are a lack of drivers.’’

The CSI 300 Index slipped 0.4 percent to 2,341.74, while the Hang Seng China Enterprises Index (HSCEI) rose 1.3 percent. The Hang Seng China AH Premium index fell to 99.71, the lowest level since January. The Bloomberg China-US Equity Index added 0.7 percent in New York yesterday.

The Shanghai index has climbed 8.8 percent since reaching this year’s low on June 27, as reports ranging from industrial production to money supply signaled the economy is stabilizing. It’s valued at 8.6 times its projected 12-month earnings, the highest since June 18, according to data compiled by Bloomberg.

‘Less Risk’

‘‘There is less risk in the near term,” said Zhu Haibin, JPMorgan Chase & Co.’s China economist in Hong Kong. “But this round of recovery will not be a strong one and won’t last long.”

Analysts surveyed by Bloomberg News last month see growth slowing to 7.3 percent in the fourth quarter, the weakest in more than four years, after 7.5 percent in the July-September period, based on median estimates.

A gauge of material stocks in the CSI 300 fell 1.5 percent, the most among 10 industry groups. Aluminum Corp. of China, the biggest producer of the metal, retreated 2.1 percent to 3.34 yuan. Jiangxi Copper, the largest copper producer, declined 1.7 percent to 16.67 yuan. Zhongjin Gold Corp. lost 2.8 percent to 10.42 yuan.

Steelmakers Drop

Baoshan Steel, the biggest-listed steelmaker, declined 0.7 percent to 4.47 yuan, after gaining 5.9 percent yesterday. Wuhan Iron & Steel Co. fell 2.9 percent to 2.39 yuan. The Ministry of Land and Resources denied an unidentified media report that said it issued a document to local governments on expanding rural land use rights transfers, the China Securities Journal reported today, citing an unidentified official from the ministry.

Steelmakers have large land reserves so they will benefit from government land reforms, Capital Securities Corp. analyst Li Xiaolu said by phone yesterday. Policy makers are drafting proposals on how to implement Premier Li Keqiang’s urbanization vision that will be presented to the Communist Party’s top leaders at a meeting in November.

China Merchants Bank gained 1.9 percent to 10.66 yuan. The lender said last month it planned to raise 34.8 billion yuan by offering 3.07 billion Shanghai-listed shares at 9.29 yuan each and 680.4 million in Hong Kong for HK$11.68. The results of the Hong Kong sale will be announced Sept. 26.

Financial Street Holdings Co., a Beijing-based developer, added 1.3 percent to 5.46 yuan, paring this year’s loss to 19 percent. Citic Securities’ analyst Chen Cong said the stock was trading at a 50 percent discount to its book value.

Trading volumes in the Shanghai index were 15 percent higher than the 30-day average for this time of day, according to data compiled by Bloomberg.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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

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