China’s Stocks Decline Most in Two Weeks Before Trade Report

China’s stocks headed for the steepest decline in two weeks, led by consumer-discretionary and commodity companies, before the release of data that will likely show a decline in exports.

The Shanghai Composite Index slipped 0.6 percent as turnover in the mainland dwindled ahead of a two-day holiday from Thursday. The Hang Seng China Enterprises Index halted an eight-day winning streak in Hong Kong. China’s exports probably dropped 4 percent in May, according to a Bloomberg survey, compared with a 1.8 percent decline in April.

After recent speculation that Chinese authorities will soon announce the start date for an exchange link with Shenzhen, investors are switching attention to the health of the economy. Data on Tuesday showed foreign-exchange reserves slipped to the lowest level since late 2011, while a report last week showed an official factory index at around the line between expansion and contraction. The benchmark gauge has struggled to break out of a range as trading volumes weaken before MSCI Inc. makes its decision next week whether to add the nation’s yuan-denominated shares to its global indexes.

“People are looking to take profits before the holidays,” said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd. “The market might have overreacted to speculation on the Shenzhen-Hong Kong link and MSCI’s inclusion of A shares even though chances are still there. The market is likely to remain in consolidation mode before the actual decision.”

The Shanghai Composite traded at 2,918.97 at 10:13 a.m., while the so-called H-shares gauge slipped 0.4 percent. The Hang Seng Index declined 0.5 percent. The number of shares traded on the Shanghai bourse declined to 13.3 billion on Tuesday, down from a six-week high of 22 billion on May 31, according to exchange data.

Before it's here, it's on the Bloomberg Terminal.