China Stocks Fall Before Trade Report as Smaller Companies Slump
Tasly Pharmaceutical Group Co. and Chengdu Dr Peng Telecom & Media Group Co. led declines for gauges of drug and technology shares that jumped at least 30 percent this year. PetroChina Co. and Jiangxi Copper Co., the nation’s biggest oil and copper producers, dropped at least 0.8 percent. Poly Real Estate Group Co. paced gains for developers on speculation regulators will ease limits on fundraising after China Merchants Property Development Co. announced plans to sell shares.
The Shanghai Composite Index (SHCOMP) fell 0.7 percent to 2,046.78 at the close. The ChiNext index of small companies slid 3 percent after its estimated price-earnings ratio jumped to the highest level since January 2011. The ChiNext may face a “correction” in the second half after surging 65 percent this year, the China Securities Journal reported today.
Small-company earnings “are just not there to warrant such valuations,” said Gerry Alfonso, a broker at Shenyin & Wanguo Securities Co. “We have advised our clients to be more defensive on this sector for some time now. Some investors are concerned about tomorrow’s export and import figures and are selling as a preventive tactic.”
Chinese stocks swung between gains and losses for most of the day as the Shanghai measure’s 50-day volatility jumped to the highest level in 17 months. The CSI 300 Index fell 0.6 percent to 2,280.62. The Hang Seng China Enterprises Index (HSCEI) lost 1.6 percent. The Bloomberg China-US 55 Index slid 0.7 percent in New York yesterday.
China’s overseas shipments are expected to have gained 2 percent in July from a year ago, compared with a 3.1 percent decline in June, according to estimates of 18 economists compiled by Bloomberg. An inflation report due Aug. 9 may show consumer-price growth quickened to 2.8 percent in July from 2.7 percent the previous month, according to another survey.
PetroChina fell 1 percent to 7.97 yuan, while Jiangxi Copper declined 0.8 percent to 15.99 yuan. Measures of energy and material stocks in the CSI 300 have slumped at least 28 percent this year amid concern a slowing economy will damp demand for commodities. They are the worst-performing groups.
Gauges of technology and drug companies in the CSI 300 fell 2.7 percent and 1.9 percent respectively, the biggest losses among 10 industry groups. Chengdu Dr Peng slid 4.5 percent to 16.40 yuan, paring this year’s gain to 175 percent. Tasly declined 5.3 percent to 45.88 yuan, trimming the 2013 advance to 66 percent.
The ChiNext index fell the most since July 25. Shanghai Wangsu Science & Technology Co. fell 4.4 percent to 52 yuan, while Lepu Medical Technology declined 4.5 percent to 10.80 yuan. Share prices of ChiNext companies more than reflect fundamentals, the China Securities Journal reported. The ChiNext index is valued at 44 times estimated earnings this year, compared with 9 times for the Shanghai Composite.
A gauge of developers in the Shanghai measure rose 0.7 percent. Poly Real Estate, the second-biggest developer, advanced 2.3 percent to 11.07 yuan. Gemdale Corp. surged 0.8 percent to 7.23 yuan.
China Merchants Property, the third-biggest developer, was suspended from trading after saying it plans to buy assets with the share sale. The share plan shows an “opening of floodgates” is definitely becoming more likely, Credit Suisse Group AG analyst Jinsong Du wrote in an e-mail response to questions. The plan should be good for industry sentiment, he said.
Sundy Land Investment Co., a Shenyang-based developer, plans to raise as much as 1.5 billion yuan ($245 million) in a private placement to finance two housing projects, the company said in a statement to Shanghai Stock Exchange yesterday. Xinhu Zhongbao Co. said on Aug. 2 it’s planning a private placement. All the share sales plans need approval by the regulators.
The government’s stance on developers’ refinancing has not changed, said an unidentified news official at China Securities Regulatory Commission, who asked not to be identified because of the agency’s rules, in a phone interview on Aug. 5.
China fined six dairy companies including Mead Johnson Nutrition Co. and Danone a combined 670 million yuan ($109 million) for price fixing, a record penalty for violating anti-monopoly laws, the official Xinhua News Agency reported.
Zhejiang Beingmate, Nestle SA’s Wyeth brand and Meiji Holdings Co. were exempt from punishment because they cooperated with the investigation, provided important evidence and carried out active “self-rectification,” Xinhua said, citing the National Development and Reform Commission.
Zhejiang Beingmate climbed for a seventh day, gaining 1.8 percent to 34.41 yuan.
To contact the reporter on this story: Weiyi Lim in Singapore at firstname.lastname@example.org