China Stocks Fall for First Time in Five Days Before NPC Meeting

China’s stocks fell, halting the benchmark index’s longest stretch of gains in three weeks, before the start of an annual policy-setting meeting tomorrow.

China Citic Bank Corp. slumped 2 percent to drag down smaller lenders as money-market rates jumped the most in six weeks. Neusoft Corp. slid 6.3 percent as a gauge of technology companies dropped the most among industry groups. China Vanke Co. (000002) led a rally for property developers after it got regulatory approval to convert its B shares into Hong Kong-traded stocks.

The Shanghai Composite Index (SHCOMP) slipped 0.2 percent to 2,071.47 at the close, halting a gain of 2 percent in the previous four days. Investors will be watching the meeting of the National People’s Congress for clues to the next steps to fix local-government finances, charge market prices for natural resources, rein in shadow-banking risks, free up deposit rates and open up state businesses to private investment.

“The market is waiting for signals that will come from the NPC such as the economic-growth target and policies on real estate,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. “Russia and Ukraine have some implications, but not that big. The decline is due to China’s internal problems like slowing growth.”

The Shanghai Composite pared losses of as much as 1.2 percent. President Vladimir Putin ordered soldiers in western Russia to return to their bases by the end of the week after military exercises ended on schedule. Investors see the news signaling a reduced likelihood of military hostilities breaking out in Ukraine’s Crimea region, said Tim Condon, head of Asia research at ING Groep NV.

The CSI 300 Index dropped 0.3 percent to 2,184.27, while the Hang Seng China Enterprises Index (HSCEI) added 0.3 percent. The Bloomberg China-US Equity Index fell 0.4 percent yesterday.

NPC Meeting

The latest meeting of China’s legislature, the first to be overseen by President Xi Jinping and Premier Li Keqiang, comes as leaders pledge to give markets a “decisive” role in the economy. The Communist Party leadership faces a dilemma over where to set a growth goal for 2014 as they wrestle with sustaining expansion while limiting debt risks, environmental damage and social unrest.

The growth target, set at 7.5 percent last year, will be announced at the NPC meeting. In a Bloomberg News survey, 63 percent of economists predict the same number this year, while 33 percent see either a 7 percent goal or a range, such as 7 percent to 7.5 percent.

Technology Stocks

A measure of technology stocks slid 2.4 percent, the most among the CSI 300’s 10 industry groups. The losses pared a rally over the past year to 33 percent. Neusoft tumbled 6.7 percent to 15.55 yuan today. Yonyou Software Co. (600588) retreated 5.6 percent to 21.41 yuan. Zhejiang Dahua Technology Co. lost 5.1 percent to 29.69 yuan.

Banks fell as money-market rates rebounded from a nine-month low after the central bank withdrew excess cash from the financial system. Citic Bank dropped 2 percent to 5.03 yuan. Ping An Bank Co. slipped 0.5 percent to 10.98 yuan.

The seven-day repurchase rate, a gauge of funding availability, jumped 68 basis points, or 0.68 percentage point, to 3.51 percent, according to a fixing published by the National Interbank Funding Center. That’s the biggest increase since Jan. 20.

The Shanghai Composite has fallen 2.1 percent this year, dragging down its multiple to 7.9 times 12-month projected earnings, compared with the five-year average of 12.2, according to data compiled by Bloomberg. Trading volumes in the index were 11 percent above the 30-day average for this time of day, according to data compiled by Bloomberg.

Ukraine Tension

China’s Foreign Minister Wang Yi held a telephone conversation with his Russian counterpart Sergei Lavrov to discuss the Ukraine situation, according to a statement on the Chinese government’s website yesterday. China and Russia share a view that the proper handling of the Ukraine crisis is important to maintaining regional peace and stability, it said.

Crimea, where ethnic Russians comprise the majority, has become the focal point of Ukraine’s crisis after an uprising triggered last month’s ouster of President Viktor Yanukovych. Ukraine has mobilized its army and called for foreign observers after Russian forces took control of the peninsula.

B shares of Vanke, the nation’s biggest listed property developer, surged by the 10 percent daily limit to HK$12.38. The yuan-denominated A shares rose 4.2 percent to 6.92 yuan.

The developer received approval to convert B-shares to shares in Hong Kong, according to a statement yesterday.

Poly Real Estate Group Co., the second-largest developer, added 2 percent to 6.78 yuan. The company said some directors and management bought a combined 180,000 shares on Feb. 28.

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

To contact the editors responsible for this story: Allen Wan at awan3@bloomberg.net; Michael Patterson at mpatterson10@bloomberg.net

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