Chinese Stocks Retreat Most in Two Weeks as Drugmakers Decline

China’s stocks fell, dragging the benchmark index down the most in two weeks, as drugmakers slid amid the start of a corruption probe and automakers declined.

Jiangsu Hengrui Medicine Co. and Beijing SL Pharmaceutical Co. sank more than 5 percent. Regulators will crack down on illegal competition and bribery in drug sales and medical services, the official Xinhua News Agency reported. SAIC Motor Corp. slumped 2.9 percent, paring its advance this month to 10 percent. Wuliangye Yibin Co., China’s second-biggest liquor maker, gained 2.4 percent after reporting first-half earnings.

The Shanghai Composite Index lost 0.9 percent to 2,081.88 at the close. The gauge has climbed 6.8 percent since reaching a more than four-year low on June 27 as July data from exports to industrial output improved. The probe will target “unfair competition” by companies abusing a dominant market position, Xinhua said late yesterday, citing the State Administration for Industry and Commerce.

“The crackdown on irregularities in the medical sector has undermined confidence among investors and they expect drug prices to fall,” said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees $3.3 billion in assets. “Investors are still cautious about whether an economic recovery will be sustained.”

The CSI 300 Index dropped 1.2 percent to 2,321.58. The Hang Seng China Enterprises Index slid 0.1 percent as trading resumed after yesterday’s shutdown because of a typhoon.

Drug Probe

The CSI 300 health-care index slumped 3 percent in a fifth day of losses. Jiangsu Hengrui Medicine slid 5.9 percent to 32.76 yuan, its biggest loss since October 2010. Beijing SL Pharmaceutical slid 5.8 percent to 55.59 yuan.

Trading volumes in the Shanghai index were 1.5 percent higher than the 30-day average today, according to data compiled by Bloomberg. The measure is valued at 8.4 times 12-month projected earnings, compared with the five-year average of 12.7 times.

SAIC, China’s largest carmaker, fell 2.9 percent to 13.50 yuan, snapping a four-day gain. Great Wall Motor Co. lost 2.8 percent to 41.87 yuan. The stock jumped 19 percent last week. Anhui Jianghuai Automobile Co., a unit of China’s biggest light-truck exporter, dropped 3.7 percent to 8.11 yuan.

Wuliangye gained 2.4 percent to 20.12 yuan. The company said net income rose 15 percent from a year earlier in the first six months of the year.

Other liquor-makers advanced. Sichuan Swellfun Co. climbed 3.7 percent to 14.17 yuan. Sichuan Tuopai Shede Wine Co. added 1.1 percent to 17.95 yuan.

Freight Rates

Rail-related shares advanced. Daqin Railway Co., the operator of China’s biggest coal transport network, surged 7.8 percent to 6.78 yuan, the most among companies on the CSI 300. Guangshen Railway Co. rallied 3.3 percent to 2.48 yuan. China Railway Tielong Container Logistics Co. gained 1.9 percent to 5.91 yuan.

“There’s speculation the government will raise rail freight rates next year and the passenger rates will follow suit,” said Dai Ming, a money manager at Hengsheng Hongding Asset Management Co. “That’s reflecting accelerating reforms of the state-controlled railway industry.”

Rail Plan

China will announce an investment and financing plan for the railway industry by the end of the year, China Business News reported, citing an unidentified person at China Railway Corp.

Shanda Games Ltd. led gains in Chinese stocks traded in New York yesterday on prospects the game operator’s second-quarter earnings will beat estimates. Shanda surged the most in four weeks as budget hotel chain operator Home Inns & Hotels Management Inc. jumped to the highest since 2011.

— With assistance by Shidong Zhang

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