Chinese Stocks Fall the Most in Six Weeks

China’s stocks fell the most in six weeks, led by financial and energy companies, amid concern recent gains were excessive relative to growth prospects.

Industrial & Commercial Bank of China Ltd., the nation’s largest lender, slid 1.7 percent, while PetroChina Co., the biggest oil company, dropped the most in two months. SAIC Motor Corp. and Tsingtao Brewery Co. decreased more than 2 percent as consumer companies slumped before tomorrow’s trade data.

The Shanghai Composite Index fell for a third day, sliding 1.3 percent to 2,187.67 at the close, the biggest drop since since June 19. The losing streak comes after the measure rose 9.9 percent from the June 19 low through Aug. 4, sending valuations to the highest levels since December in the biggest rally among global equity indexes. The gauge will probably end its rally within days and fall about 10 percent, Tom DeMark, the developer of market-timing indicators, said this week.

“It seems that there wasn’t a consensus among investors regarding the sustainability of the rally,” Gerry Alfonso, a trader at Shenyin & Wanguo Securities Co. in Shanghai, said in an e-mail. “While the long-term outlook for the market remains positive, it seems clear that a significant amount of investors have decided that now is the time to take profits in some of these stocks. It seems that some investors wanted to make sure that the rally was over before selling.”

The Hang Seng China Enterprises Index, also known as the H-share index, slipped 0.9 percent at 3:20 p.m. The CSI 300 Index closed down 1.3 percent. The Bloomberg China-US Equity Index slid 0.5 percent yesterday. Trading volumes in the Shanghai index were 32 percent above the 30-day average, according to data compiled by Bloomberg.

Trade Data

The Shanghai index swung between gains and losses at least 10 times today as 10-day volatility reached the highest levels since April. Price swings fell to a record low on July 8.

The measure of China’s $3.5 trillion stock market has outperformed equity indexes in 46 emerging and developed countries in the past six weeks. Signs of monetary easing, accelerated government spending and gains in manufacturing spurred speculation the nation’s economic growth will pick up.

July economic data due over the next week, starting with tomorrow’s trade numbers, will give a sense of how well growth is holding up after accelerating to 7.5 percent in the second quarter from a year earlier. The statistics bureau releases inflation figures Aug. 9, followed by industrial production, fixed-asset investment and retail sales on Aug. 13.

Exports probably rose 7 percent last month, compared with growth of 7.2 percent in June, according to a median estimate of 44 economists surveyed by Bloomberg.

Biggest Declines

“We expect trade data tomorrow to be positive,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Investors are just taking a breather after a strong rally. This is just temporary. Gains will continue.”

Measures of energy and consumer-staples shares in the CSI 300 each dropped 1.9 percent, the biggest losses among 10 industry groups. The sub-indexes have rallied at least 7.8 percent in the past month for the best performance among the groups after materials.

Tsingtao Brewery dropped 4.1 percent in Shanghai and fell 2.3 percent in Hong Kong. Inner Mongolia Yili Industrial Group Co. declined 3.1 percent. PetroChina slid 1.5 percent, while coal miner Wintime Energy decreased 6.9 percent, paring a rally to 68 percent since July 22.

ICBC paced declines for financial companies, sliding the most since June 20. Citic Securities Co., the biggest-listed brokerage, dropped 2.9 percent in Shanghai and 1.8 percent in Hong Kong after reporting July net income of 444.8 million yuan ($72.2 million), down from June’s 645 million yuan.

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