Chinese Stocks Fall as H-Shares Gauge Slide Second Week

Chinese stocks fell, sending a gauge of Hong Kong-traded shares to its second weekly loss, after the U.S. central bank signaled interest rates may rise earlier than expected and China money-market rates climbed.

China Pacific Insurance (Group) Co. and Tsingtao Brewery Co. led declines for financial and consumer stocks, with each falling at least 1.4 percent in Hong Kong. Bank of China Ltd. dropped to a three-month low in Shanghai after the lender traded without the dividend. Shanxi Coal International Energy Group Co. slid 3.2 percent after suing companies for missed payments.

The Hang Seng China Enterprises Index, also known as the H-share index, slid 0.3 percent to 10,307.51 at the close in Hong Kong, extending this week’s loss to 0.9 percent. The Shanghai Composite Index fell 0.1 percent to 2,036.51. The seven-day repurchase rate, a gauge of interbank funding availability, climbed a second week as banks hoarded cash to meet quarter-end requirements.

“There’s still concern about tightening of liquidity as we approach the end of the month,” said Zeng Xianzhao, an analyst at Everbright Securities Co.

The H-share index has fallen 4.7 percent this year, compared with a 3.8 percent loss for the Shanghai index. The H-shares measure is valued at 6.9 times projected 12-month earnings, compared with 7.5 times for the Shanghai Composite Index and 15.7 for the Standard & Poor’s 500 Index. Futures on the S&P 500 slipped 0.1 percent today.

James Bullard, president of the Federal Reserve Bank of St. Louis, predicted the central bank’s first interest-rate rise will happen in the first quarter of next year. He spoke in an interview yesterday on Fox Business Network. Most investors are forecasting higher rates later in the year, according to Ryan Larson of RBC Global Asset Management (U.S.) Inc.

Losing Steam

Hong Kong’s Hang Seng Index closed 0.1 percent higher at 23,221.52 after falling as much as 0.4 percent. Want Want China Holdings Ltd. climbed 2.4 percent, with the snackmaker leading gains on the benchmark. Standard Chartered Plc dropped 4.5 percent after the British bank said first-half profit probably plunged 20 percent. SA SA International Holdings Ltd. slipped 2.5 percent after Citigroup Inc. cut its rating on the cosmetics retailer.

“The Hong Kong market is losing steam after yesterday’s rally given the lack of catalysts,” Linus Yip, a strategist at First Shanghai Securities Ltd. in Hong Kong, said by phone. “We may see further consolidation.”

The CSI 300 Index gained 0.1 percent to 2,150.26, paring this year’s loss to 7.7 percent. The ChiNext Index advanced 0.2 percent today in Shenzhen. The small-company index jumped 2 percent yesterday, led by technology shares, after regulators allowed the first companies to go public in four months.

IPO Surge

Shandong Longda Meat Foodstuff Co., Wuxi Xuelang Environmental Technology Co. and Feitian Technologies Co. each gained 10 percent today after halting trading yesterday after jumping by the 44 percent limit on their debut.

Shares of Shanghai Lianming Machinery Co. will start trading in Shanghai on June 30. Lianming’s initial public offering was 150 times oversubscribed.

Chinese IPOs during the first two months of 2014 surged an average 43 percent on their trading debuts as regulators pressured companies to price the deals at below-average valuations. Investors have flocked to new listings this year as the Shanghai Composite declined, property prices dropped and slowing economic growth raised concerns of defaults in wealth-management products.

China Economy

Data today showed China’s industrial profits grew 8.9 percent last month from a year earlier, slowing from a 9.6 percent pace in April. The government should cut lenders’ reserve-requirement ratios for all banks to support the economy as the ratios are too high, cited China Construction Bank President Zhang Jianguo as saying at a shareholders’ meeting in Hong Kong yesterday.

The seven-day repo rose 21 basis points, or 0.21 percentage point, to 3.86 percent as of 4:03 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. Trading volumes on Shanghai’s equity benchmark were 31 percent above the 30-day average, according to data compiled by Bloomberg.