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China’s Stocks Decline to 2009 Low With Trading Activity

China’s stocks fell, dragging the benchmark index to its lowest level since 2009, as trading activity slumped. Materials producers and property developers led losses.

Citic Securities Co. dropped among brokerages as regulatory data showed the number of stock trading accounts that made transactions last week was the lowest since at least January 2008, excluding holidays. Zhongjin Gold Co., the country’s third-largest bullion producer, lost 3.3 percent as the metal’s price slid. Poly Real Estate Group Co. dropped the most in two months after the Xinhua News Agency reported a leading think tank recommended expanding a property tax.

The Shanghai Composite Index slid 0.9 percent to 1,973.52 at the close, its lowest level since Jan. 16, 2009, as eight stocks dropped for each that rose. The CSI 300 Index fell 1 percent to 2,129.16. The Hang Seng China Enterprises Index lost 1.5 percent in Hong Kong. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, declined 1.6 percent in New York yesterday.

When the Shanghai index first hit 2,000, “it was 10-to-12 years ago and now we’re back at square one,” Hao Hong, Bank of Communications Co.’s managing director of research, said in a Bloomberg Television interview today. “Now we’re well below 2,000 and people will be looking for the next support level, which could be 5-to-10 percent below here.”

The Shanghai Composite closed below 2,000 for the first time since 2009 yesterday. The gauge broke above 2,000 in July 2000 and tripled to 6,092.06 on Oct. 16, 2007, according to data compiled by Bloomberg dating to 1991. It’s fallen 10 percent this year, heading for a third straight annual loss, as the economy slowed for seven quarters.

Stock Valuations

Shares worth 33.1 billion yuan ($5.3 billion) changed hands in the measure on Nov. 26, the least since Nov. 7, 2008. The Shanghai index trades at 9.4 times estimated profit for 2012, compared with the 17.7 average multiple since Bloomberg began compiling the data in 2006.

Citic Securities, China’s biggest listed brokerage, declined 1.4 percent to 10.25 yuan. Haitong Securities Co., the second largest, retreated 1.6 percent to 8.26 yuan.

China’s money-market rate climbed most in four weeks on speculation cash supply will tighten as banks hoard funds to meet month-end capital requirements.

The seven-day repurchase rate, which measures interbank funding availability, touched a four-week high of 3.40 percent, according to a weighted average rate compiled by the National Interbank Funding Center, and today’s 51 basis point gain is the biggest since Oct. 29.

Economic Signs

Investor interest in mainland China-traded shares has fallen even as data showed signs of a recovery in the world’s second-largest economy. Industrial companies’ profit grew 20.5 percent in October, the statistics bureau said yesterday, while factory output and exports both rose last month by the most since May.

Fourth-quarter industrial output may be higher than in the third quarter as the impact from growth policies becomes more apparent, the Shanghai Securities News said today, citing an unidentified Ministry of Industry and Information Technology official.

The National Bureau of Statistics and China Federation of Logistics and Purchasing are due to release a manufacturing index for this month on Dec. 1. The Purchasing Managers’ Index probably rose to 50.8 from 50.2 in October, according to the median estimate of 15 economists in a Bloomberg survey. The number of 50 is the dividing line between expansion and contraction.

Property Stocks

Zhongjin Gold Co. lost 3.3 percent to 15.08 yuan. Spot gold fell as much as 0.2 percent today to the lowest level this week.

A measure of property stocks in the Shanghai Composite fell 2.2 percent today, the most in two months. Poly Real Estate, China’s second-largest developer, dropped 3.5 percent to 11.01 yuan. China Vanke Co., the biggest, lost 1.4 percent to 8.34 yuan.

China should expand its pilot property tax reforms beyond Shanghai and Chongqing and impose the tax on homes featuring more than 40 square meters per person, according to a report released yesterday by the Chinese Academy of Social Sciences.

Policy makers have taken steps this year to revive confidence in the $2.6 trillion stock market. China Securities Regulatory Commission Chairman Guo Shuqing has reduced transaction fees on equity trades, urged listed companies to pay more cash dividends and changed how initial public offerings are priced. The government also more than doubled allotments under the qualified foreign institutional investor program in April to $80 billion.

More Measures

“To reverse the situation, regulators need to work out more support measures,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “The Shanghai index will probably fall another 10 percent before reaching a bottom.”

JiuGuiJiu Co., whose liquors have been found to have excessive levels of plasticizers, tumbled by the 10 percent daily cap for a fourth straight day to 31.22 yuan. The company said it didn’t halt total production and continues some liquor production process as normal.

China isn’t a currency manipulator under U.S. law, though the yuan “remains significantly undervalued” and needs to rise further, the Treasury Department said in a statement accompanying its semi-annual currency report to Congress yesterday.

Thirty-day volatility in the Shanghai Composite was at 13 today, compared with this year’s average of 17.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slipped 0.8 percent to $37.05 in New York yesterday.

Carson Block

Carson Block said it’s become too difficult to short Chinese equities in the U.S. as bets on stock declines drop by 50 percent from a year ago.

Block, known for his allegations that Chinese companies traded in North America engaged in accounting fraud, said in an interview yesterday that he’s lost interest in betting against the stocks because the government helps protect them. Short interest in the 83 biggest Chinese firms listed in New York has dropped to an average 2.61 percent of the total outstanding, from 5.22 percent a year ago, data compiled by Bloomberg and the U.K. researcher Markit show.

The State Administration for Industry and Commerce, which compiles corporate records in China, didn’t immediately respond to faxed questions seeking comment today.

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