China Stocks Drop as Financial Companies Fall Most in Two Months

China’s stocks fell, led by the biggest retreat in financial companies in two months, amid concern the government may encourage more competition among banks and expand property taxes.

Ping An Bank Co. (000001) paced declines among lenders as a gauge of financial shares sank 2.8 percent. China Vanke Co. (000002) and Poly Real Estate Group Co. dropped at least 3 percent after the China Securities Journal reported the government may accelerate a property-tax trial. Apple Inc. suppliers, including GoerTek Inc. (002241), jumped after a record number of iPhones were sold in the weekend debut.

The Shanghai Composite Index (SHCOMP) slipped 0.6 percent to 2,207.53 at the close. Kingfa Scientific & Technological Co. said in a stock exchange statement it plans to set up a bank in Guangzhou city, while the 21st Century Business Herald reported yesterday that Chinese authorities may approve a new non-state lender before March.

“The entry of private sectors into the banking industry means more competition,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees $3.3 billion. “Smaller banks will bear the brunt of the deregulation.”

Trading volumes in the Shanghai measure were 13 percent higher than the 30-day average, according to data compiled by Bloomberg. The index is valued at 8.8 times projected earnings for the next 12 months, compared with the five-year average of 12.6 times.

Banks Fall

The CSI 300 (SHSZ300) Index fell 1.2 percent, while the Hang Seng China Enterprises Index (HSCEI) of mainland companies in Hong Kong retreated 1.1 percent.

A group of financial stocks in the CSI 300 slumped the most among the 10 industry groups. Ping An Bank tumbled 4.7 percent to 12.27 yuan. Industrial Bank Co., part-owned by a unit of HSBC Holdings Plc, fell 3.5 percent to 11.45 yuan. Kingfa surged by the 10 percent daily limit.

China may place priority on financial reform after the Communist Party plenum in November, according to a front page commentary in the China Securities Journal. Premier Li Keqiang said China has chosen not to loosen or tighten monetary policy, according to a statement dated yesterday on the central government’s website.

Vanke, the nation’s biggest listed property developer, fell 3 percent and Poly Real Estate, the second largest, lost 3.1 percent. China will start a second round of property training for people working in the taxation system next month, signaling an acceleration of tax trials, the China Securities Journal reported, citing unidentified people.

“The news of the property tax is pressuring the market and that will cause some investors to take short-term profit,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai.

GoerTek surged 3.2 percent, extending a 6.2 percent gain yesterday. Sales of iPhones almost doubled from the previous record even amid supply constraints, Apple (AAPL) said in a statement. The results led Apple to say that quarterly revenue and gross margin will be at the top end of a prior forecast.

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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