China Stocks Extend Biggest Retreat in a Month in Hong Kong

  • Insurers' earnings sink after equity rout hurt investments
  • Shares rallied this month after measures to bolster markets

Chinese stocks posted their biggest three-day loss in a month in Hong Kong as earnings at some of the nation’s largest companies missed estimates and traders increased bets for a December interest-rate increase in the U.S.

The Hang Seng China Enterprises Index dropped 1.1 percent to 10,439.38 at the close, capping a three-day, 2.9 percent retreat. China Life Insurance Co. sank 5.4 percent after reporting lower net income. The Shanghai Composite Index rose 0.4 percent at the close. Around 67 percent of Shanghai-listed companies that have reported third-quarter results so far have trailed analysts’ forecasts, versus 52 percent for the MSCI Emerging Markets Index.

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“Corporate earnings and the Fed’s possible interest-rate increase are factors that are holding back the market now,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai, who’s reducing his stock holdings. “For the market to come back, we’ll need to see the economy pick up and earnings turn around.”

The two Chinese equity gauges have rebounded 11 percent this month after the government took measures to stabilize both the mainland stock market following a $5 trillion rout and the economy. Odds the Federal Reserve will move on rates at their next meeting jumped to 48 percent from around 32 percent a week ago, after the central bank dropped a reference to global risks and asserted that economic growth remains “moderate.”

Party Plenum

The Communist Party is due to end a four-day plenum for its central committee Thursday, and may release a general outline of the social and economic development plan for the next five years. Premier Li Keqiang highlighted a minimum growth estimate for China in the coming five years that could indicate the leadership’s readiness to accept the weakest period of expansion since the economy was opened up three decades ago.

China Life’s shares dropped the most since Aug. 24 after posting a 74 percent slide in profit. New China Life Insurance Co. slid 4.8 percent for its biggest loss this month.

Insurers’ Earnings

Chinese insurers’ net incomes are tumbling in the third quarter as the stock market plunge hurt their investments. Industry-wide net income jumped 204 percent in the first half, according to the regulator.

Bank of China Ltd., China Construction Bank Corp., China Petroleum & Chemical Corp. and PetroChina Co. are among companies scheduled to announce third-quarter earnings after the market close. PetroChina rose 2 percent in Hong Kong after crude jumped late Wednesday.

Margin traders reduced holdings of shares purchased with borrowed money for the first time in five days on Wednesday, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling by 0.3 percent to 626 billion yuan.

In Shanghai, drug and consumer-staples companies led gains. Luzhou Laojiao Co. advanced 3.5 percent after reporting a 6 percent gain in third-quarter net income. Jiangsu Hengrui Medicine Co. surged 3.1 percent.

A sense of normalcy has returned to the world’s second-largest equity market after months of turmoil that rattled global investors. Foreigners have been adding to holdings through the Shanghai-Hong Kong exchange link for the past two weeks, while volatility in the benchmark Shanghai Composite has eased to an almost four-month low.

The nation needs annual growth of at least 6.53 percent in the next five years to meet the government’s goal of establishing a “moderately prosperous society,” Li said in an Oct. 23 speech to Communist Party members, according to people familiar with the matter who asked not to be named as the remarks weren’t public.

— With assistance by Shidong Zhang

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