China’s stocks declined as losses by industrial companies and energy producers overshadowed gains in shares linked to Shanghai’s free-trade zone.
China Shipbuilding Industry Co. slumped 2.6 percent and China Petroleum & Chemical Corp. fell to a three-week low. Shanghai Lujiazui Finance & Trade Zone Development Co. and Shanghai Waigaoqiao Free Trade Zone Development Co. jumped by the 10 percent daily limit after the state-run Xinhua News Agency said the city’s free-trade zone will open this weekend.
The Shanghai Composite Index slid 0.4 percent to 2,198.52 at the close, extending yesterday’s 0.6 percent drop. The gauge has advanced 11 percent since June, heading for the biggest quarterly gain since the final three months of 2009, as economic data signaled growth is accelerating and investors speculated the free-trade area will serve as a testing-ground for reduced government regulation and freer yuan convertibility.
“We are seeing some profit-taking after a decent run-up in the index,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co., which oversees $120 million.
Trading volumes in the Shanghai Composite were 11 percent higher than the 30-day average today, according to data compiled by Bloomberg. The index is valued at 8.8 times projected earnings for the next 12 months, compared with the five-year average of 12.6 times.
The CSI 300 Index declined 0.6 percent to 2,429.03. The Hang Seng China Enterprises Index was little changed. A measure of industrial stocks in the CSI 300 sank 1.2 percent, the most among the 10 sub-indexes.
China Shipbuilding, the nation’s largest maker of vessel equipment, dropped to 6.42 yuan. The stock has jumped 42 percent after announcing a plan on Sept. 10 to buy military assets of building battleships and submarines from affiliates.
China Petroleum, Asia’s biggest oil refiner, also known as Sinopec, lost 0.9 percent to 4.45 yuan, the lowest close since Sept. 3.
China’s economy slowed this quarter as growth in manufacturing and transportation weakened, in contrast with official signs of an expansion pickup, a private survey showed.
Increases in business-investment and real estate revenue also slowed, while service industries picked up and employees became tougher to find, the survey from New York-based China Beige Book International said yesterday. The report is based on responses from 2,000 people from Aug. 12 to Sept. 4 as well as 32 in-depth interviews conducted later in September.
Shanghai Lujiazui rose to 27.36 yuan, surging by the daily limit for a fourth straight day and reaching the highest level since December 2009. Shanghai Waigaoqiao climbed to 64.16 yuan, a record close. Shanghai Oriental Pearl Group Co. advanced 9.9 percent to 9.77 yuan, the highest level since November 2010.
Shanghai’s free-trade zone will open on Sept. 29, the Xinhua News Agency reported on its microblog yesterday, citing the local government. A draft plan seen by Bloomberg News shows the area may liberalize 19 industries from banking to shipping.
China’s improving official economic data are unconvincing to Jim Chanos, the founder of Kynikos Associates Ltd., who is maintaining bearish bets on the nation’s banks.
“My caution is related to the credit-driven model,” Chanos, who correctly predicted in 2001 the collapse of Enron Corp., said on a panel moderated by Tom Keene at the Bloomberg Markets 50 Summit in New York. “If you grow new credit by 30 percent to 40 percent” of gross domestic product a year, it’s not difficult to reach the government’s growth target, he said.
While Chanos said China will have a “credit event” in five years as the country fails to keep the same pace of loan growth, Jim O’Neill, the former chief economist at Goldman Sachs Group Inc. and a Bloomberg View columnist, said the economy will double in five years to $16 trillion, about the same size of the U.S. economy currently.
— With assistance by Shidong Zhang