China Stocks Fall on Biggest Swings in Five Years as Brokers Dip

China’s stocks fell, sending a gauge of volatility in the benchmark index to five-year highs, after the nation’s biggest oil producers slumped and brokerages declined amid concern recent gains were excessive.

PetroChina Co. and China Petroleum & Chemical Corp. slid at least 2 percent. China Oilfield Services Ltd. plunged 7.1 percent in Hong Kong after the company estimated a decline in profits from lower crude prices. Citic Securities Co. and Haitong Securities Co., the largest brokerages,, slumped more than 9 percent in Shanghai after rallying more than 60 percent in the past month. Benchmark money-market rates also jumped today amid concern upcoming new share sales will divert funds.

The Shanghai Composite slid 0.5 percent to 2,925.74 at the close, after gaining as much as 0.9 percent and falling as much as 1.6 percent. The index’s 10-day volatility surged to the highest level since 2009 as investors assess the sustainability of a rally that has been the world’s best among major global markets over the past month and propelled share prices to the most expensive levels in three years.

“We will be seeing fluctuations for a while near the resistance level of 3,000,” said Zhang Yanbing, an analyst at Zheshang Securities Co. in Shanghai. “Some stocks are being dragged down by the tumble in oil prices today. Still, the bull market is not over so we will continue to see gains in equities in the long run.”

The CSI 300 Index dropped 1.2 percent. The Hang Seng China Enterprises Index lost 1 percent, while the Hang Seng Index declined 0.9 percent. Trading volumes in the Shanghai index were 34 percent above the 30-day average, according to data compiled by Bloomberg.

Bullish Mobius

The Shanghai gauge has climbed 18 percent over the past month amid speculation the central bank will ease monetary policy to support economic growth after data this week showed inflation slowed more than forecast. It trades at 11 times 12-month projected earnings, near the highest level since August 2011. The 14-day relative strength measure reached the highest levels in two decades this week.

Money manager Mark Mobius said the bull market in Chinese stocks is just getting started and he’s using the biggest price swings in five years to boost holdings.

“We are buying more in China because we think this is the beginning of a longer-term bull run,” Mobius, who oversees about $40 billion as the executive chairman of Templeton Emerging Markets Group, said in a phone interview yesterday from Thailand.

Oil Slump

PetroChina and Sinopec were responsible for almost half of the losses in the Shanghai index based on points. China Oilfield slumped 2.4 percent in Shanghai after saying it expects revenue and operating profit for 2015 will drop from this year. Global demand for crude from the Organization of Petroleum Exporting Countries will fall next year by about 300,000 barrels a day to 28.9 million, the least since 2003, the group said yesterday.

Air China Ltd. and China Southern Airlines Co. gained by the 10 percent daily limit. China, the largest crude oil importer globally, will benefit as every one percent drop in oil prices means $2.2 billion in savings and a boost in total net profit by 0.2 percent, Citigroup Inc. said last month. Every 100 yuan ($16.2) drop in jet fuel prices can reduce annual costs for China’s three major airlines by about 400 million yuan, according to Citic Securities Co.

IPO Concerns

China’s benchmark interest-rate swap climbed by the most since March and money-market rates increased as the central bank refrained from offering reverse-repurchase agreements in today’s auction window. The seven-day repurchase rate, a gauge of interbank funding availability, rose 16 basis points to a four-month high of 3.81 percent, a weighted average compiled by the National Interbank Funding Center shows.

The China Securities Regulatory Commission gave written approval for 12 initial public offering applications, according to a statement posted on its official microblog yesterday.

A gauge of financial shares in the CSI 300 slid 3.2 percent, the most among 10 industry groups. Brokerages were the 10 biggest losers in the gauge, with Founder Securities Co. and Western Securities Co. sliding by 10 percent. Founder Securities and Western Securities have surged at least 80 percent over the past month. Brokerages have rallied as new stock account openings jumped to five-year highs and traders increased the use of leverage to buy stocks.

Investors bought 92.6 billion yuan of shares using margin debt on the Shanghai bourse yesterday, taking the outstanding value of stock purchases through borrowed money to a record 614 billion yuan, according to data from the bourse.

The CSRC will assign inspection teams next week to check margin trading and short selling businesses at brokerages and some may receive penalties, reported today, without citing anyone.

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