Most Chinese Stocks Drop as Insurers Retreat After Sichuan Quake

Most Chinese stocks fell as insurers slumped on concern that claims arising from the deadly Sichuan quake will hurt earnings. Infrastructure companies rallied on speculation they will benefit from reconstruction.

China Life Insurance Co. slumped the most since March 4 after the temblor, the strongest in three years, killed at least 188 people and injured 11,500. Shanxi Xinghuacun Fen Wine Factory Co. led declines for liquor makers, plunging 8 percent as Sealand Securities Co. said sales may slow. Sichuan Road & Bridge Co. and Chongqing Iron & Steel Co. jumped 10 percent. Great Wall Motor Co. surged to a record high after BNP Paribas SA boosted its earnings estimates for the company.

“Investors are concerned that insurers may take the bulk of responsibility for damages by the earthquake,” Zhang Gang, a strategist at Central China Securities Holdings Co. in Shanghai, said by phone.

The Shanghai Composite Index declined 0.1 percent to 2,242.17 at the close, with 475 stocks falling and 446 gaining. The CSI 300 Index fell 0.1 percent to 2,530.67. The Hang Seng China Enterprises Index advanced 0.1 percent in Hong Kong. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. rose 2.7 percent in New York on April 19.

The Shanghai Composite has dropped 7.9 percent from a Feb. 6 high, on concern slowing growth will hurt earnings. Valuations on the Shanghai gauge are 9.2 times projected 12-month profits, compared with the seven-year average of 15.8, data compiled by Bloomberg show.

Insurers Slump

China Life fell 2.6 percent to 17.22 yuan, the biggest drag on the Shanghai Composite gauge. Ping An Insurance (Group) Co. lost 2.2 percent to 41.95 yuan.

The earthquake in Lushan county, about 1,650 kilometers (1,000 miles) southwest of Beijing, was measured at magnitude 6.6 by the U.S. Geological Survey and hit on the same fault line as a 7.9 earthquake that devastated nearby Wenchuan in May 2008. The Ministry of Finance said yesterday 1 billion yuan ($162 million) has been earmarked for rescue and relief work, relocation of people and medical treatment.

Sichuan-based infrastructure companies rallied on speculation they will benefit from reconstruction. Chongqing Iron & Steel and Sichuan Road & Bridge jumped by the daily maximum limit.

“Compared with the Wenchuan quake in May 2008, the Lushan quake delivers a much smaller hit to the Chinese economy as the quake zone is mainly limited to just one prefecture which is economically unimportant,” Ting Lu, economist at Bank of America Corp., wrote in a note to clients. “The impact of post-quake rebuilding is irrelevant for the nation’s macro economy.”

Liquor Makers

Shanxi Xinghuacun Fen Wine tumbled 8 percent to 28.24 yuan, the most since Dec. 3. Investors are concerned the worst is yet to come for sales of the company’s high-end liquor, Liu Jinhu, analyst at Sealand Securities, said from Shenzhen.

Kweichow Moutai Co. slid 3.1 percent to 173.71 yuan. China’s largest baijiu liquor maker on April 17 reported a first-quarter profit that was less than half the pace of the year-earlier period as President Xi Jinping pushed to curb extravagant spending by government officials.

Great Wall jumped 7.7 percent to 34.03 yuan. The company is the most likely automaker to report profits that beat analysts’ estimates as its factories are running at full utilization and non stop, BNP Paribas analyst Tina Li wrote in a report.

Economic Outlook

China’s first-quarter expansion rate of 7.7 percent is “normal” as the world’s second-largest economy sacrifices growth to make structural reforms, People’s Bank of China Governor Zhou Xiaochuan told Bloomberg News outside a meeting of the International Monetary Fund in Washington on April 20.

A preliminary reading for a Purchasing Managers’ Index will be released tomorrow by HSBC Holdings Plc and Markit Economics. The HSBC China April manufacturing PMI may have fallen to 51.4 from 51.6 in March, according to estimates.

Concern that China’s economy will struggle to grow has helped drag Shanghai’s stock trading volumes toward the lowest levels versus Tokyo in almost five years. About 2.1 billion more shares were traded on the Shanghai index than on the Topix Index on April 12, the least since November 2008 apart from one other occasion and holidays, according to data compiled by Bloomberg.

Bets on declines in the largest Chinese exchange-traded fund are surging to the highest level since 2007. Short interest on the iShares FTSE China 25 Index Fund rose to 48.6 million shares, or 3.2 percent of the total outstanding at the end of March, the most since June 2007, Bloomberg data showed.

“I am cautious,” Elena Ogram, who holds fewer Chinese stocks than global benchmarks in her $50 million portfolio of emerging-market assets at Bank Bellevue AG, said by phone from Zurich April 18. “There’s more uncertainty and less visibility. I am not expecting spectacular earnings from Chinese companies.”

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. slumped 1.1 percent in New York last week, led by solar manufacturers.

Of the 55 companies on the China-US stock measure, 16 are scheduled to report quarterly earnings this week, including China Life, Yanzhou Coal Mining Co., Guangshen Railway Ltd., China Petroleum & Chemical Corp. and Baidu Inc.

-- Editors: Richard Frost, Allen Wan

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