China’s stocks fell the most in two weeks as financial companies slumped the most among industry groups on concern earnings growth will slow.
Citic Securities Co. (600030) and Haitong Securities Co., the nation’s largest-listed brokerages, slid more than 3 percent after Bank of America Corp. said brokerages will suffer from government efforts to encourage banks to offer asset-management products. Jiangsu Hengrui Medicine Co. dropped the most in two months after the company said it will hire lawyers to probe a media report that it got trade secrets from former Eli Lilly & Co. employees. Cosco Shipping Co. slumped the most in two weeks after gaining 6.8 percent in the previous three trading days.
“It’s a bad news for brokerages as banks are entering what brokerages are doing now,” said Dai Ming, a money manager at Hengsheng Hongding Asset Management Co. “There will be more competition for brokerages and their earnings will be hurt.”
The Shanghai Composite Index (SHCOMP) fell 0.9 percent to 2,190.93 at the close, the biggest loss since Sept. 26. The CSI 300 Index dropped 1 percent to 2,429.32. The Hang Seng China Enterprises Index (HSCEI) slid 0.9 percent. Chinese stocks extended losses on speculation a bank is hedging out of an options contact, according to Gavin Parry, managing director of Parry International Trading Ltd.
A gauge of financial stocks in the CSI 300 fell 2 percent, the most among 10 industry groups. Citic Securities slid 3.8 percent to 12.05 yuan. Haitong Securities lost 5.4 percent to 11.98 yuan. Industrial Bank Co. fell 3.2 percent to 11.21 yuan. China Minsheng Banking Corp. lost 2.6 percent to 9.50 yuan.
Chinese brokerages, banks and mutual-fund managers may be hurt from speculation the government wants asset-management plans to replace wealth-management products, according to Bank of America.
If banks are forced to switch to asset management from wealth products, investors will be more aware of risks they take on and turn more cautious with buying such financial products, strategists including David Cui wrote in a note dated yesterday. They cited a 21st Century Business Herald report that 11 banks are testing direct debt financing instruments and asset-management plans.
The parent of Alipay.com Co., billionaire Jack Ma’s online payments-system operator, will pay 1.18 billion yuan ($193 million) for a 51 percent stake in Tian Hong Asset Management as it expands into financial services. Inner Mongolia Junzheng Energy & Chemical Industry Co., a shareholder of Tian Hong Asset, jumped by the 10 percent daily limit to 10.99 yuan.
Jiangsu Hengrui Medicine slid 3.8 percent to 34.06 yuan. The Indianapolis Business Journal reported Oct. 8 that former Lilly employees stole more than $55 million in trade secrets and passed them to the Chinese company.
Cosco Shipping, a unit of China’s biggest shipping company, fell 3.4 percent to 3.65 yuan. China Cosco Holdings Co., the biggest shipping company, declined 2.5 percent to 3.49 yuan. The Baltic Dry Index (BDIY), a benchmark of commodity shipping rates, slumped for the first time in six days, losing 1 percent.
Shanghai International Port (Group) Co., the biggest contributor to gains in the benchmark index from Aug. 22 through Sept. 17, declined 5.4 percent to 5.62 yuan. CTS International Logistics Corp. tumbled 5 percent to 14.78 yuan.
The “underwhelming” launch of the Shanghai free-trade zone has led many to reassess the likelihood the zone will become a test for far-reaching policy reform anytime soon, Capital Economics Ltd. wrote in a note.
The Shanghai Composite has rebounded 12 percent since June 27 as companies based in the city rose on speculation they will benefit from deregulation in the Shanghai trade zone, a testing ground opened last month for free-market policies. Trading volumes in the Shanghai measure were 2.9 percent higher than the 30-day average, according to data compiled by Bloomberg.
The Shanghai index may reach 2,400 next year, according to HSBC Holdings Plc. Liquidity, valuation and fund flows could be supportive for the market in the fourth quarter, HSBC equity strategists wrote in a report dated yesterday. The index trades at 8.7 times projected earnings for the next 12 months, compared with the five-year average of 12.6 times, according to data compiled Bloomberg.
The government will start to release September economic data as early as this week. The central bank may release reports on money supply and new lending as early as today, while the customs office is scheduled to provide foreign-trade data on Oct. 12.
The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.4 percent in New York yesterday on speculation the nomination of Janet Yellen to lead the U.S. Federal Reserve will give emerging markets a reprieve from any immediate withdrawal of stimulus.
President Barack Obama nominated Yellen, an architect of the Fed’s stimulus program, to lead the central bank. House Republican and Senate Democratic leaders are open to a short-term increase in the debt limit, said congressional aides of both parties who spoke on condition of anonymity to discuss strategy.
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at email@example.com