Most Chinese Stocks Rise on SOE Reform Report; Moutai Declines
Most Chinese stocks rose as Shanghai-based companies rallied on expectations the city will accelerate reforms of state-owned enterprises.
Shanghai International Port (Group) Co. (600018) jumped 10 percent after China Central Television reported the company will seek private and international funds as strategic investors. Retailer Shanghai Friendship Group Inc. and Shanghai Lujiazui Finance & Trade Zone Development Co. also surged by the daily limit. Kweichow Moutai Co., the biggest maker of baijiu liquor, slumped 2.6 percent after projecting slower sales growth this year.
“SOE reforms are good long-term news for the stock market as they will boost efficiency and profitability,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Thematic investment is still the focus of the market now.”
The Shanghai Composite Index (SHCOMP) rose for a third day, adding 0.1 percent to 2,067.31 at the close. The Chinese government may announce investment projects and reforms of state-owned companies as the slowdown in manufacturing threatens Premier Li Keqiang’s 7.5 percent economic growth target for this year, Barclays Plc said in a report yesterday.
The CSI 300 Index slipped 0.1 percent to 2,174.44. The Hang Seng China Enterprises Index (HSCEI) gained 0.2 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.- listed Chinese companies, added 0.6 percent yesterday.
The Shanghai index has fallen 2.3 percent this year as analysts cut their estimates for 2014 economic growth, the nation suffered its first onshore corporate bond default and an unlisted developer collapsed.
Investors should avoid China’s bond market after the onshore default because state intervention and debt restructuring could prompt losses, according to New York-based hedge fund Maglan Capital LP.
The best way to make money from distressed companies in the world’s second-largest economy is by betting against listed stocks, according to David Tawil, co-founder of Maglan Capital, which invests in companies struggling to repay their debt.
Shanghai International Port surged 10 percent to 4.92 yuan The company will open to more private investors and international funds and seek new strategic investors as part of SOE reforms, CCTV reported, citing the company. Shanghai will develop a “mixed-ownership” mechanism for SOE reform, it said.
Other companies based in China’s commercial hub also gained. Shanghai Friendship surged 10 percent to 10.85 yuan. Shanghai Lujiazui climbed 10 percent to 18.10 yuan. Shanghai Jinqiao Export Processing Zone Development Co. (600639) advanced 10 percent to 11.42 yuan.
The Shanghai Composite is valued at 7.6 times 12-month projected earnings, compared with the five-year average multiple of 12.1, according to data compiled by Bloomberg. Trading volumes in the index were 10 percent above the 30-day average today, Bloomberg data showed.
A measure of consumer-staples stocks lost 0.8 percent today, the most among the CSI 300’s 10 sub-indexes.
Kweichow Moutai fell 2.6 percent to 166.81 yuan. The company expects revenue to increase 3 percent in 2014, it said in an annual report yesterday. That compares with 17 percent revenue growth last year, when net income rose 14 percent.
Shanxi Xinghuacun Fen Wine Factory Co. tumbled 7.6 percent to 16.22 yuan after saying profit declined 27 percent last year.
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