China’s Stocks Decline, Capping Weekly Loss, After Shipment Data

Chinese stocks fell, capping a weekly decline, as import growth lagged behind exports in the year’s first two months and investors awaited the release of data from inflation to industrial production tomorrow.

Combined exports for January and February increased 23.6 percent from a year earlier, compared with a 5 percent gain in imports, data showed today. Ping An Bank Co. dropped among financial shares after the lender’s non-performing loans increased. Inner Mongolia Yili Industrial Group Co., a milk producer, sank the most in six weeks. SAIC Motor Corp. advanced 2 percent after reporting higher vehicle sales.

The Shanghai Composite Index slid 0.2 percent to 2,318.61 at the close, taking its loss for the week to 1.7 percent amid concern the government will tighten monetary policy and regulators will allow the resumption of initial public offerings. The CSI 300 Index retreated 0.5 percent to 2,606.93. The Hang Seng China Enterprises Index climbed 1.4 percent.

“Import data today shows the economy isn’t improving as much as we hoped for,” said Cao Xuefeng, an analyst at Huaxi Securities Co. in Chengdu. “If inflation is high tomorrow, there will be more concern about tightening, while IPO worries persist.”

Overseas shipments increased 21.8 percent in February from a year earlier, the customs administration said, compared with the 8.1 percent median estimate in a Bloomberg News survey. Imports fell a more-than-estimated 15.2 percent, leaving a trade surplus of $15.25 billion.

Stock Volatility

Economic indicators in the first two months of the year are distorted by the weeklong Lunar New Year holiday, which was in January in 2012 and February this year.

Inflation probably quickened to 3 percent in February, compared with 2 percent in the previous month, a report tomorrow may show, while industrial output may have grown 10.6 percent.

Volatility on the CSI 300 surged this week as the gauge tumbled 4.6 percent on March 4 before jumping 4.1 percent in the following two days as investors speculated whether the government would take steps to avert asset bubbles. The gauge slid 1.2 percent yesterday as the Shanghai Securities News said regulators may allow IPOs from June. Volatility as measured by a 30-day index climbed to a one-year high on March 5.

A gauge tracking financial companies lost 0.4 percent today, accounting for a third of the CSI 300’s decline. Ping An Bank dropped 3.7 percent to 22.86 yuan. The company said non-performing loans at the end of December rose from three months earlier. Credit Suisse Group AG cut its recommendation on the shares to neutral. China Vanke Co. slid 2.2 percent, taking its loss for the week to 9 percent.

Inflation Goal

China may need to raise interest rates should gains in the consumer-price index stay at more than 3.5 percent for three months, Chen Dongqi, the deputy head of the National Development and Reform Commission’s macroeconomic research institute, said yesterday.

Speculation that China will raise borrowing costs for the first time since mid-2011 is increasing as the world’s second-largest economy recovers from the weakest growth in 13 years, credit expands and property prices rebound. Premier Wen Jiabao this week set a 3.5 percent inflation goal for 2013, down from 4 percent last year.

The People’s Bank of China will allow branches to raise the downpayment and interest rate on second homes, according to local governments’ property control targets, the China Securities Journal reported, citing the central bank.

An index of consumer staples producers retreated 1.2 percent, second-most among the CSI 300’s 10 industry groups. Inner Mongolia Yili Industrial sank 3 percent to 28.52 yuan. Chongqing Brewery Co. declined 4.4 percent to 18.94 yuan. The stock jumped 24 percent in the previous three days after Carlsberg A/S offered to boost its stake in the company.

Stock Valuations

Among automakers, SAIC Motor gained 1.8 percent to 16.12 yuan. The company said combined January-February sales rose 16.8 percent.

The Shanghai Composite, up 18 percent since reaching an almost four-year low on Dec. 3, trades for 9.5 times projected 12-month earnings. That compares with the MSCI Emerging Markets Index’s 10.5 times, according to data compiled by Bloomberg.

The Bloomberg China-US 55 Index advanced 0.2 percent in New York yesterday. The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., added 0.2 percent.

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