China Stocks Slump to One-Week Low Before Party Meeting BeginsWeiyi Lim
China’s stocks declined to a one-week low, led by consumer discretionary and financial companies, before the start of a Communist Party meeting later this week.
Great Wall Motor Co. sank 8.5 percent. Ping An Bank Co. and Poly Real Estate Group Co. slid at least 2.1 percent. China Petroleum & Chemical Corp., known as Sinopec, rose to the highest level since June after its parent company increased its stake and said it plans to buy more shares.
The Shanghai Composite Index dropped 0.8 percent to 2,139.61, the lowest close since Oct. 29 and reversing a 0.4 percent gain. Trading volumes were 21 percent below the 30-day average after falling to the lowest since July 31 on Nov. 4. Top party officials will meet in Beijing from Nov. 9-12 to map out a blueprint for reform as the country heads for its slowest growth in more than two decades.
“Financial shares are leading the index lower as liquidity is tight at the end of year and there are no bright spots in earnings too,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “There’s more speculation and uncertainty before the plenum this week.’
The CSI 300 Index decreased 1.3 percent to 2,353.57, while the ChiNext index of small-company shares lost 1.5 percent, erasing a 1.4 percent advance. The Hang Seng China Enterprises Index slid 0.8 percent. The Bloomberg China-US Index fell 1.3 percent yesterday.
The Shanghai index has dropped 5.7 percent this year and trades at 8.5 times projected profits for the next 12 months, lower than the seven-year average of 15.3, according to data compiled by Bloomberg.
Nine of the 10 industry groups fell on the CSI 300 today, led by a 2.7 percent plunge by consumer discretionary companies. Great Wall Motor Co. sank to 40.20 yuan. Chongqing Changan Automobile Co., the partner of Ford Motor Co., plunged 5.6 percent to 11.43 yuan. the most since since Aug. 15. SAIC Motor Corp. declined 3.4 percent to 14.69 yuan.
China’s ‘‘economy is faltering and will get much worse if this weekend’s third plenum fails to produce drastically needed economic reforms,” Patrick Chovanec, chief strategist at Silvercrest Asset Management, wrote in a report. “Regretfully, none of the evidence to-date suggests that China’s ruling party has a real appetite for game-changing market policy.”
The financials gauge slumped 1.6 percent, the most since Oct. 16 and accounting for half of the CSI 300’s decline. Ping An Bank dropped 3.7 percent to 13.15 yuan. Industrial Bank slumped 2.6 percent to 11.19 yuan. Poly Real Estate, the second-biggest developer, retreated 2.1 percent to 9.31 yuan.
“Investors got cold feet and worried that expectations for reforms at the plenum wouldn’t come through,” said Qian Qimin, an analyst at Shenyin & Wanguo Co.
The index of energy companies rallied 1.7 percent. Sinopec, the largest Chinese oil refiner, gained 2.2 percent to 4.72 yuan. Its parent company bought about 6.1 million shares yesterday and plans to increase its stake in the next 12 months.
Other energy stocks advanced. PetroChina Co., the nation’s biggest energy producer, rose 1.3 percent to 7.91 yuan. Offshore Oil Engineering Co. climbed 4.9 percent to 9.30 yuan, taking its gain for the week to 14 percent. Guanghui Energy Co. added 4.6 percent to 11.75 yuan.
China will maintain the stability and consistency of its policies, the People’s Bank of China said in a third-quarter report yesterday. The central bank reiterated that the country will pursue a prudent monetary policy, according to the report.