China’s Stocks Fall, Capping Longest Losing Streak in 4 Months

China’s stocks fell for a fifth day, sending the benchmark index to its longest losing streak in four months, as concern the government won’t accelerate reforms overshadowed better-than-estimated economic data.

Guoyuan Securities Co. slid to the lowest level in two months, taking its slump this week to 7.8 percent after posting slumping net income. Great Wall Motor Co. paced declines for consumer discretionary companies, the best performers in the CSI 300 Index this week. Data on industrial production, fixed-asset investment and retail sales all exceeded economists’ forecasts, while declines in producer prices eased.

The Shanghai Composite slid 0.1 percent to 2,069.07 at the close. The measure fell 2.3 percent in the past five days, the longest losing streak since a seven-day drop to June 28. The CSI 300 Index lost 0.2 percent to 2,240.92 as the Communist Party held a second day of meetings to decide new leaders.

“While the numbers are showing the economy is stabilizing, it still remains to be seen if the pick-up will continue,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “There’s nothing exciting about policy prospects from the party congress so far and we need to wait for more positive signals.”

The Shanghai Composite has fallen 5.0 percent in 2012, slumping for a record third year, on concern the government isn’t reforming the economy fast enough to offset a decline in exports. Trading volumes in the index were 20 percent lower than the 30-day average, data compiled by Bloomberg show. Thirty-day volatility was at 15.9, lower than this year’s average of 17.2. The measure trades at 9.8 times estimated profit for 2012, compared with the 17.8 average multiple since 2006.

Economic Indicators

The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong dropped 0.9 percent. The Bloomberg China-US 55 Index slumped 1.6 percent in New York yesterday, amid concerns European finance ministers may delay Greece’s bailout and President Barack Obama’s re-election may endanger U.S. tax breaks for investors.

Some indicators are rebounding and the economy is stabilizing, Zhou Xiaochuan, governor of the People’s Bank of China, said yesterday in Beijing at a briefing during the Communist Party’s 18th Congress. Ma Jiantang, head of the National Bureau of Statistics, said separately that people will be “more confident” about the fourth-quarter expansion.

Industrial production rose 9.6 percent in October from a year earlier, the National Bureau of Statistics said. That exceeded the 9.4 percent median estimate of analysts surveyed by Bloomberg News. Retail sales growth of 14.5 percent picked up from September’s 14.2 percent. Fixed-asset investment increased 20.7 percent in the first 10 months from a year earlier, compared with the 20.6 percent median analyst estimate and a 20.5 percent pace in the January-September period.

No Surprise

The producer-price index dropped 2.8 percent from a year earlier in October, narrowing from a 3.6 percent a month earlier, while consumer prices rose 1.7 percent, according to the bureau.

“The economic data are slightly good but haven’t brought any big surprise,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Investors had expected positive news and policies from the party congress and we haven’t seen any so far.”

Brokerages were the biggest decliners in the CSI 300’s financial gauge this week. Guoyuan Securities slid 1.8 percent to 10.18 yuan. Its weekly loss was the steepest since August. Everbright Securities Co. dropped 2.7 percent to 11.07 yuan, adidng to a weekly loss of 9.7 percent. Both brokerages said this week net incomes for October fell from a month earlier amid declines for the nation’s equities.

Car Sales

Great Wall Motor, China’s biggest pickup truck maker, fell 1.4 percent to 18.91 yuan. Anhui Jianghuai Automobile Co., a unit of China’s biggest light-truck exporter, lost 1.5 percent to 5.36 yuan. The CSI 300’s consumer discetionary gauge slipped 1.6 percent this week, outperforming all other industry groups.

Chinese passenger-car sales gained 6.4 percent to 1.3 million units last month, the China Association of Automobile Manufacturers said after the market closed. That exceeded the 1.28 million average estimate of eight analysts surveyed by Bloomberg.

China’s stocks will linger around current levels unless there are positive catalysts such as policy easing, which is looking less likely given recent data showing the economy is stabilizing, Hao Hong, managing director of research at Bank of Communications Co., said in a Bloomberg Television interview today. The People’s Bank of China has cut interest rates twice since early June and lowered reserve ratios three times from last November.

Party Congress

Economic development remains “unbalanced, uncoordinated and unsustainable,” and China’s leaders must “work harder” to solve those problems, said President Hu Jintao, in one of his final public appearances before handing over to Xi Jinping, designated as the party’s next general secretary.

The make-up of the new Politburo Standing Committee, the top body whose members will be announced just after the end of the congress, may give clues to China’s appetite for policy shifts the World Bank says it must embrace to become a high-income economy. The reform agenda ranges from breaking up state monopolies to deregulating lending rates and ending under-pricing of natural resources.

Michael Pettis, a finance professor at Peking University, said there is “still a huge amount of uncertainty around the makeup” of the Standing Committee which will determine “the pace and urgency of economic reform.”

Gold Stocks

Shandong Gold Mining Co. led gains for materials producers after gold futures jumped to a three-week high. Shandong Gold, China’s second-largest bullion producer by market value, rose 0.6 percent to 38.55 yuan. Zhongjin Gold Co., the third biggest, gained 0.4 percent to 16.10 yuan.

Spot gold increased as much as 0.2 percent to $1,735.45 an ounce, the most expensive since Oct. 19. A fifth day of gains would be the longest rally since August. Gold traders are the most bullish in 11 weeks and investors accumulated record bullion holdings on speculation U.S. policy makers will add to stimulus following Obama’s re-election.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., sank 2 percent to $36.52 in New York yesterday, the lowest level since Oct. 12.

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