China’s stocks fell the most in a month, led by shippers and banks, after UBS AG downgraded China Shipping Development Co. and investors speculated a three-week rally on the Shanghai free-trade zone’s prospects was overdone.
Shanghai Pudong Development Bank Co. slid 2.8 percent after valuations jumped to a six-month high this week. China Shipping Development tumbled 5.3 percent, paring a rally since Aug. 22 to 42 percent. Jiangxi Copper Co. and Aluminum Corp. of China Ltd. retreated at least 1.4 percent, pacing declines for raw-material producers after metal prices slumped yesterday.
The Shanghai Composite Index fell for the first time in six days, losing 0.9 percent to 2,236.22 at the close, the biggest drop since Aug. 15. The 14-day relative strength index, measuring how rapidly prices have risen or dropped during a specified time period, was at 74.7 today. Readings above 70 show a price may be poised to fall.
“It’s good to see some corrections for stocks after the recent rally,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees $3.3 billion in assets. “After the correction, we’ll see stocks continue to go up as there are lots of expectations about reform measures from the government.”
The Shanghai measure is valued at 9 times its projected 12-month earnings, compared with the five-year average of 12.6 times, according to data compiled by Bloomberg. Trading volumes were 29 percent above the 30-day average today.
The CSI 300 Index slid 0.7 percent to 2,488.90 today. The Hang Seng China Enterprises Index lost 1.3 percent. The Bloomberg China-US Equity Index dropped 1.3 percent yesterday.
The Shanghai index gained 4.5 percent this week, the most since February. It has rebounded 15 percent since reaching this year’s low on June 27 as August data ranging from exports to industrial output showed growth is accelerating and as shippers and port operators rallied after the State Council approved Shanghai’s free-trade zone.
The rebound in Chinese equity markets should continue as economic growth bottoms and the government resumes funding some urbanization-related projects, Khiem Do, head of multi-asset strategy at Baring Asset Management Asia, said in a phone interview. Industrial companies, banks and materials producers will gain momentum, he said.
Shanghai Pudong Bank slid 2.8 percent to 11.91 yuan, paring this week’s rally to 24 percent. Industrial & Commercial Bank of China Ltd. fell 1.5 percent to 3.99 yuan. Gauges of financial and industrial stocks in the CSI 300 jumped 8.9 percent and 6.2 percent this week, the biggest gains among 10 industry groups, on speculation the trade zone will boost profit.
China will push forward interest-rate and exchange-rate reforms and the internationalization of the yuan while promoting the currency’s convertibility under the capital account, Premier Li Keqiang said in a Sept. 11 speech at the World Economic Forum in the northeast city of Dalian.
China Shipping Development, a unit of the country’s second-biggest sea-cargo group, slid 5.3 percent to 5.02 yuan. The stock had its rating cut to neutral from buy, Judy Chen, an analyst at UBS, said by phone today.
Shanghai International Port Group Co. slumped 2.5 percent to 6.51 yuan. The port operator has climbed 155 percent since Aug. 22, when the Ministry of Commerce said the city’s free-trade zone proposal was approved in July. That’s the most among the 995 companies on the Shanghai Composite.
Economic reforms by the new central government will be first applied in the trade zone as a national strategy, the Shanghai Daily reported today, citing Wang Xinkui, head of the city government’s counselor office.
Jiangxi Copper, China’s biggest producer of the metal, fell 1.4 percent to 17.23 yuan. Aluminum Corp. of China, the listed unit of nation’s biggest maker of the lightweight metal, lost 3.6 percent to 3.78 yuan. Copper futures dropped to a five-week low yesterday as economic data from Australia to Europe fanned concern that metal demand may ebb.