Chinese stocks fell, dragging the benchmark index to its first weekly decline this month, amid concern the economic slowdown will hurt earnings and that more cities will take steps to limit property-price increases.
Poly Real Estate Group Co., China’s second-largest developer by market value, sank the most in almost four weeks after a Guangzhou newspaper reported the city is studying property curbs. Kweichow Moutai Co., the nation’s biggest liquor maker by market value, dropped to an 11-week low.
The Shanghai Composite Index lost 1.5 percent to 1,992.65 at the close, taking its decline this week to 2.3 percent. The gauge lost 12 percent in 2013 as the economy slowed and money-market rates reached record highs. While China Central Television reported yesterday Premier Li Keqiang as saying the government can achieve major economic development goals this year, the official Xinhua News Agency said the nation faces a complex “external environment” in the second half of the year.
“What the government is signaling is that the economy is in good shape at least for the year,” said Dai Ming, a money manager who helps oversee $19 million at Hengsheng Hongding Asset Management Co. “But the market is concerned that the government has fewer tools now to stabilize the economy than before. Volatile sentiment will dominate the market.”
The index’s 30-day volatility was at 27 today, the highest since December 2010, while trading volumes were 11 percent higher than the 30-day average, data compiled by Bloomberg show.
The CSI 300 Index dropped 2.4 percent to 2,190.48, with financial shares including developers and banks accounting for 43 percent of the decline. The Hang Seng China Enterprises Index lost 0.5 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.2 percent yesterday.
The Shanghai Composite trades at 8.1 times 12-month projected profit, compared with the multiple of 8 reached on June 24, which was the lowest level in at least five years, data compiled by Bloomberg show.
While China’s equity valuations are attractive, the market is a “value trap” with limited upside, Kelvin Tay, the Singapore-based chief investment officer for the southern Asia-Pacific region at UBS AG’s wealth management unit, said in an interview.
A gauge of property stocks in the Shanghai Composite sank 3.6 percent, the largest slump of five industry groups. Poly Real Estate lost 5.6 percent to 10.18 yuan, the most since June 24. China Vanke Co., the biggest, slumped 5.5 percent to 956 yuan. China Merchants Property Development Co., the third largest, sank 6.8 percent to 25.13 yuan.
The housing authority of Guangzhou city, the capital of Guangdong province, held a meeting yesterday to discuss property curb measures, the Xinkuaibao newspaper reported on its website, without saying where it got the information. Vanke and Poly Real Estate are among developers that derive 20 percent or more of their sales from Guangdong, data compiled by Bloomberg show.
Kweichow Moutai slumped 4.9 percent to 176.01 yuan, the lowest close since May 3. Wuliangye Yibin Co., China’s second-biggest liquor maker by market value, fell 3 percent to 19.30 yuan.
“The bearish sentiment on the liquor industry may carry on as the government isn’t loosening its crackdown on corruption and slowing growth curbs consumption,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai.