China’s Stock Index Falls on Valuation Concerns; B Shares Rally

China’s benchmark stock index fell for the first time in five days on speculation a rally that drove valuations to a seven-month high was excessive. A gauge of foreign-currency traded shares rallied for a 15th day, the longest streak in two decades.

Poly Real Estate Group Co. and China Merchants Property Development Co. led declines for a gauge of developers, the best performer in Shanghai last year, on concern gains in home prices will lead to new property curbs. Ping An Insurance (Group) Co. plunged 3.7 percent after Caixin Online reported China Development Bank halted a loan to Charoen Pokphand Foods PCL for its purchase of stake in the insurer. Health-care and consumer-staples companies climbed after underperforming during a bull-market rally for the CSI 300 Index over the past month.

“The market is seeing some profit-taking after a nice run-up,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “There’s some sector rotation going on with laggards playing catch-up.”

The Shanghai Composite Index lost 0.4 percent to 2,276.07 at the close, even as about two stocks rose for each one that fell. The measure has rebounded 16 percent from an almost four-year low on Dec. 3 on signs economic growth is picking up.

The Shanghai Composite trades at 12.6 times reported earnings, the highest level since June, according to daily data compiled by Bloomberg since 2006. The 14-day relative strength measure, measuring how rapidly prices have advanced or dropped during a specified time period, was at 77.7 yesterday. Readings above 70 indicate a price may be poised to fall, according to some traders.

Property Stocks

The CSI 300 slid 0.4 percent to 2,525,33 today after entering a bull market yesterday with a 20 percent climb from its 2012 low on Dec. 3. A gain of 20 percent or more signals a bull market to some investors. The Hang Seng China Enterprises Index slid 1.9 percent today. The Bloomberg China-US 55 Index fell 0.9 percent in New York yesterday.

A gauge of property stocks in the Shanghai index slumped

1.2 percent, the most among five industry groups. The property measure jumped 38 percent last year, compared with a 3.2 percent gain for the Shanghai Composite.

Poly Real Estate, China’s second-largest developer by market value, fell 1.2 percent to 13.78 yuan. Merchants Property sank 2.2 percent to 29.99 yuan. Gemdale Corp., the fourth biggest, dropped 1.7 percent to 7.11 yuan.

Gain in home prices in December may trigger new property curbs, Dai Fang, an analyst at Zheshang Securities Co., said by phone today. In its more than two-year effort to rein in prices, the central government raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, increased building of low-cost social housing, and placed home-purchase restrictions in about 40 cities.

Ping An

Ping An, the second-biggest Chinese insurer, slumped 1.76 yuan to 45.46 yuan. China Development Bank halted a HK$44 billion loan to Charoen Pokphand for its purchase of a stake in Ping An, Caixin Online reported, citing an unidentified person from the bank.

A China Development Bank spokesman didn’t answer office and mobile phone calls seeking comment. Suthana Hongthong, an assistant vice president for Charoen Pokphand, declined to comment on the report while Dhanin Chearavanont, the company’s chairman, was not immediately available to comment.

SAIC Motor Corp., the biggest automaker, lost 2.5 percent to 16.91 yuan. The stock rose to its highest close since July 2011 on Dec. 31. Jiangsu Yueda Investment Co., which makes cars with Kia Motors Corp., slid 2.6 percent to 11.44 yuan.

B Shares

Shanghai’s B-share index jumped 2.6 percent today in a 15-day rally that’s the longest ever according to data compiled by Bloomberg. It’s up 29 percent from a July low.

Livzon Pharmaceutical Group Inc. may convert its Shenzhen-listed B shares into Hong Kong-listed H shares, China Business News reported today, citing an unidentified person.

“With expectations that more B-shares are converting into H-shares, investors are buying these stocks, as they are cheap now and may gain in value in the future when they are converted,” said Xu Shengjun, an analyst at Jianghai Securities Co. in Shanghai.

Chinese stocks have rallied over the past month on speculation the government will introduce more measures to bolster an equities market that was the worst performer among so-called BRIC nations last year. The Shanghai Stock Exchange said yesterday it’s encouraging listed companies to pay cash dividends of at least 30 percent of their net profits.

“This is the first time the Shanghai exchange has issued such a guideline on dividend payments,” said Dazhong Insurance’s Wu. “This makes dividend payments for companies more implementable and is positive for the market.”

Laggards Advance

Average trading volumes in the Shanghai Composite were up 29 percent from the 30-day average. Thirty-day volatility was at

20.2, compared with last year’s average of 17.1.

Measures of health-care and consumer staples stocks advanced 2.3 percent and 2.4 percent respectively, the most among the CSI 300’s industry groups.

A gauge of technology stocks rose 1.9 percent, led by a 4.7 percent gain for NavInfo Co. China ordered all new heavy trucks and some new towing trucks in nine regions to install navigation systems that have both the Beidou satellite positioning system and U.S.’s Global Positioning System, according to a statement on the Ministry of Transport’s website.

Health-care, consumer staples and technology stocks climbed 10 percent, 11 percent and 12 percent respectively from Dec. 3 through yesterday, compared with the 20 percent gain for the CSI

300. Only the utilities gauge performed worse.

Kangmei Pharmaceutical Co. jumped 5.1 percent to 14.10 yuan while Hualan Biological Engineering Inc. gained 3.1 percent to

23.30 yuan. Kweichow Moutai Co., China’s biggest producer of baijiu liquor by market value, rose 3.2 percent to 210.84 yuan. Wuliangye Yibin Co., the second largest, climbed 2.1 percent to

28.13 yuan.

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