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China’s Stocks Decline as Earnings Drag on Banks to Drugmakers

Oct. 31 (Bloomberg) -- China’s stocks fell, capping the benchmark index’s first monthly loss since June, as earnings at banks and consumer-staple producers disappointed investors.

China Minsheng Banking Corp. slid 2.4 percent after net income trailed estimates. Inner Mongolia Yili Industrial Group Co. and Guangzhou Baiyunshan Pharmaceutical Holdings Co. both slumped by the daily 10 percent limit after posting earnings. Poly Real Estate Group Co. led property stocks higher.

The Shanghai Composite Index lost 0.9 percent to 2,141.61 at the close. The gauge slid 1.5 percent in October, taking its annual decline to 5.6 percent. Earnings at the 252 companies in the measure tracked by Bloomberg that reported results this quarter have trailed analyst estimates by 6.1 percent.

“Earnings were generally worse than expected, which has dampened sentiment,” said Zeng Xianzhao, an analyst at Everbright Securities Co. in Chongqing.

The CSI 300 Index fell 1.4 percent to 2,373.72, while the Hang Seng China Enterprises Index dropped 0.4 percent. The Bloomberg China-US Equity Index gained 0.5 percent in New York yesterday. The Shanghai index trades at 8.5 times projected profits for the next 12 months, lower than the seven-year average of 15.4.

China Minsheng Banking slid 0.22 yuan to 8.96 yuan. The company reported third-quarter net income of 10.4 billion yuan ($1.7 billion), trailing the 10.7 billion yuan estimate of analysts compiled by Bloomberg.

Bad Loans

The nation’s top four banks posted their biggest increase in soured loans since at least 2010. Nonperforming loans at Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. rose 3.5 percent in the three months to Sept. 30 from June to a combined 329.4 billion yuan, Bloomberg data showed.

Money-market rates fell and interest-rate swaps retreated from the highest level since June as the central bank added cash to the financial system for the second time this week.

The People’s Bank of China conducted 16 billion yuan of 14-day reverse-repurchase contracts today at a yield of 4.3 percent, according to a trader at a primary dealer required to bid at the auctions. That followed an injection of 13 billion yuan via seven-day reverse repos at 4.1 percent on Oct. 29. Commercial banks hoard cash toward month-end to meet liquidity requirements set by the central bank and corporate tax payments fell due in October, tying up funds.

Company Earnings

Gauges tracking consumer-staple producers and health-care companies tumbled at least 2.4 percent. Inner Mongolia Yili Industrial dropped 4.57 yuan to 41.13 yuan. The company’s third-quarter net income growth of 28.6 percent was below market consensus of more than 60 percent, according to Ping An Securities Co.

Baiyunshan fell 3.42 yuan to 30.82 yuan. Third-quarter net income was 141 million yuan, compared with an estimate of at least 200 million yuan at Capital Securities Corp.

“Health-care earnings are much lower than expected, leading to the sector’s sell-off today,” said Li Ying, an analyst at Capital Securities.

A gauge of developers in the Shanghai index rose 0.2 percent. Poly Real Estate advanced 1.8 percent to 9.51 yuan, the highest close since Oct. 23. Gemdale Corp. increased 1.7 percent to 5.84 yuan.

A government statement yesterday, about an Oct. 29 study session on housing by the ruling party’s decision-making Politburo, didn’t mention home prices, triggering speculation policy makers won’t impose further property curbs, according to Credit Suisse Group AG.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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