Most Chinese stocks fell as declines by technology shares and power producers overshadowed gains among property and consumer-staples companies. Price swings on the Shanghai Composite Index dropped to a five-month low before the release of a manufacturing gauge tomorrow.
Huaneng Power International Inc. plunged 5.8 percent after Citigroup Inc. said China may cut the on-grid tariff for coal-fired power plants. Sanan Optoelectronics Co. sank for the first time in 11 days, while the ChiNext index of start-up companies slumped 3.2 percent. China Vanke Co. led gains for real-estate companies as Deutsche Bank AG said earnings of the largest developers are stable. Kweichow Moutai Co., China’s biggest liquor maker, climbed 2.3 percent.
Five stocks declined for every four that rose in the Shanghai Composite Index, which dropped 0.1 percent to 2,302.40 at the close. A preliminary reading for a May purchasing managers’ index from HSBC Holdings Plc and Markit Economics due tomorrow will probably be 50.4, unchanged from a month earlier, the median estimate of 13 analysts in a Bloomberg survey. A reading above 50 indicates expansion.
“The market is waiting for the flash PMI, which will provide a rough picture of how the economy is faring,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Some investors believe growth will be stabilizing.”
The Shanghai Composite has rebounded 5.9 percent since May 2. It trades at 9.7 times 12-month projected earnings, the highest since March 26, data compiled by Bloomberg show. The gauge’s 50-day volatility dropped to 16.6 today, the lowest level since Dec. 13, while trading volumes in the index were 43 percent higher than the 30-day average, the data showed.
The CSI 300 Index added 0.1 percent to 2,618.03.
Hong Kong’s Hang Seng China Enterprises Index lost 0.3 percent as it resumed trade following a rainstorm that forced the cancellation of the city’s morning session. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, declined 1 percent yesterday. The iShares FTSE China 25 Index Fund dropped 0.7 percent.
Huaneng Power, the listed unit of China’s largest power group, tumbled 5.8 percent to 6.50 yuan. Citigroup downgraded the Hong Kong-listed stock to neutral from buy because China may cut the on-grid tariff in the third quarter by 2 percent, analysts led by Pierre Lau wrote in a note.
Sanan Optoelectronics led declines for technology companies, sliding 2.6 percent to 19.17 yuan and paring this month’s rally to 36 percent. Leshi Internet Information & Technology Co. paced declines for Shenzhen-listed ChiNext stocks, falling 5.5 percent to 45.07 yuan.
Investors will rotate out of smaller companies and into larger stocks as liquidity tightens, Chen Li, the UBS AG strategist who predicted the tumble in China’s smallest shares two years ago, said in a May 9 phone interview.
The gap between yields on China’s short- and long-term debt is the tightest in 17 months as the central bank drains cash from the financial system and Premier Li Keqiang limits stimulus amid an economic slowdown.
“The curve has been flattening because the central bank’s recent tightening measures have made it difficult for companies to raise enough funds from the bond market, which may create some drag on the economy,” said Jiang Chao, a bond analyst in Shanghai at Haitong Securities Co., the nation’s second-biggest listed brokerage.
Vanke, the nation’s biggest listed property developer, rose 0.6 percent to 12.10 yuan. Poly Real Estate Group Co., the second biggest, added 0.7 percent to 12.40 yuan.
China’s property prices will rise “moderately” the rest of the year and earnings of large developers are “quite stable,” Ma Jun, chief economist for Greater China at Deutsche Bank, said at a press conference in Singapore today.
A measure of consumer-staples stocks in the CSI 300 advanced 1.1 percent, the most among the 10 industry groups. Kweichow Moutai added 2.3 percent to 199.47 yuan. Wuliangye Yibin Co., the second largest, rose 3.1 percent to 24.22 yuan.
Fortune CLSA Securities Ltd. boosted its share-price forecast for Moutai to 237.39 yuan and increased its 2013 net-profit estimate by 2.3 percent, citing recovering demand, according to a report from analysts Katharine Song and Heather Hsu dated May 20.
Risen Energy Co. led a rally for solar stocks after Yingli Green Energy Holding Co. said yesterday first-quarter shipments will exceed its previous forecast, boosting the industry prospects. The stock jumped 6 percent to 6.04 yuan. EGing Photovoltaic Technology Co. added 3.5 percent to 10.14 yuan.