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China’s Stock Index Drops on Holiday Retail Sales Growth

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Feb. 18 (Bloomberg) -- China’s benchmark stock index fell, led by consumer-staples producers and property developers, on concern growth in retail sales slowed during the week-long Lunar New year holiday.

Kweichow Moutai Co. slumped 4.4 percent, sending a gauge of consumer-staples producers to the biggest loss among industry groups after a crackdown on extravagant spending by officials limited outlays on food and drink. Gemdale Corp. plunged 5.2 percent on concern property sales slumped during the holiday. Zijin Mining Group Co., the largest gold producer, slid the most since September after bullion futures dropped on Feb. 15.

The Shanghai Composite Index fell 0.5 percent to 2,421.56 at the close, even as five stocks rose for every four that dropped. The CSI 300 Index lost 1.2 percent to 2,737.47. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong slid 0.7 percent.

Consumer staples dropped because of “weak Lunar New Year sales,” Zhang Haidong, analyst at Tebon Securities Co., said by telephone in Shanghai. “The economy is still recovering.”

The Shanghai index has risen 24 percent from a three-year low on Dec. 3 on signs economic growth is accelerating. The gauge is valued at 13.4 times reported profit, the highest level since Sept. 2011, data compiled by Bloomberg show. Trading volumes were 12 percent lower than the 30-day average, according to Bloomberg data.

Retail Sales

A gauge of consumer-staples producers in the CSI 300 including liquor makers declined 2.1 percent, the biggest drop since Dec. 24. Kweichow Moutai, the largest maker of baijiu liquor, slid 4.4 percent to 179.69 yuan. Wuliangye Yibin Co., the second largest, dropped 2.7 percent to 25.20 yuan.

Sales at shops and restaurants monitored by the Ministry of Commerce increased 14.7 percent in the Feb. 9 to Feb. 15 holiday period from the year-earlier break to 539 billion yuan ($86 billion), the ministry said in a statement on Feb. 15. That was down from a 16.2 percent pace in 2012 and the least since a 13.8 percent gain in 2009, according to previously released figures.

The New Year holiday, comparable to the peak Christmas shopping rush in the U.S., is a period when consumers in the world’s second-biggest economy splurge on food, jewelry and gifts, and government officials are wined and dined. Sales may have been damped by a campaign started by Xi Jinping, the new head of the Communist Party, to rein in lavish spending while rising incomes prompt more Chinese to travel overseas.

Gold Stocks

Gemdale slumped 5.2 percent to 7.52 yuan. China Vanke Co., the largest developer, lost 2.7 percent to 11.70 yuan.

Shanghai’s new home sales fell 79 percent in the week ended Feb. 17 from the previous week, Shanghai UWin Real Estate Information Services said today. Chinese property sales in the first two weeks of February dropped 62 percent from the previous month, according to an e-mailed statement yesterday from CEBM, which tracks 58 mainland cities.

Zijin Mining slumped 2.6 percent to 3.81 yuan. Shandong Gold Mining Co. plunged 4.4 percent to 36.70 yuan. Bullion tumbled 3.4 percent last week as improving economic data from the U.S. reduced the appeal of haven assets. Billionaire investors George Soros and Louis Moore Bacon cut their stakes in gold ETPs last quarter, government filings showed last week.

Anhui Conch Cement Co., the biggest Chinese cement maker, gained 0.3 percent to 21.34 yuan, after the Xinhua News Agency reported Beijing plans new subway line construction worth 36 billion yuan ($5.8 billion). The shares have rallied 29 percent since the start of the bull-market rally for Chinese equities on Dec. 3 amid speculation the government will boost spending for urban development.

Construction of a new Beijing subway line will begin next month to help ease congestion, Xinhua said yesterday, citing an announcement from the company overseeing the project. The number of lines will rise to 19 by 2015 with a total length of 561 kilometers (349 miles), it said.

“After attempting to catch up with the rest of the region in the morning, investors are back to profit-taking as we did gain a lot over the last month,” said Tang Yonggang, an analyst at Hongyuan Securities Co. in Beijing. “Still, in the longer term, we expect stocks to continue to rally because there’s confidence the economy will recover.”

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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