China’s Stocks Fall as Tightening Concerns Drag Financials Lower

By Weiyi Lim 

China’s stocks fell, dragging the CSI 300 Index (SHSZ300) down the most in three weeks, on concern official measures to rein in home prices will hurt corporate earnings.

China Minsheng Banking Corp. (600016) sank 3.9 percent after China Securities Journal reported many banks have started to control the scale of loans for property development. Haitong Securities Co. sank 3.5 percent, leading declines among brokerages. Yanzhou Coal Mining Co. (600188) dropped to a three-week low after a brokerage downgrade. Dongfeng Automobile Co. fell 1.7 percent after 2012 net income slumped. The Shanghai Composite Index (SHCOMP) lost 1.6 percent to 2,289.8 as of 1:30 p.m. local time. It fell 0.1 percent yesterday following a four-day, 3.9 percent rally that drove it to a two-week high. The CSI 300 Index, which tracks stocks in Shanghai and Shenzhen, retreated 1.7 percent, the most since March 4, to 2,567.65. Hong Kong’s Hang Seng China Enterprises Index sank 1.1 percent.

“There’s concern property curbs may impact the economy and investors started selling the bigger stocks like financials,” said Cao Xuefeng, an analyst at Huaxi Securities Co. in Chengdu. “This will be a short-term sell-off. Prices are still reasonable so investors will be back.”

The Shanghai Composite has lost 5.8 percent from a Feb. 6 peak on concern the nation’s economic recovery is faltering. Last week’s rally drove the gauge to its highest close since March 6, bolstered by a March 21 purchasing managers index showing manufacturing is likely to expand at a faster pace this month. The economy is improving after a slowdown, Yale University senior fellow Stephen Roach said in a Bloomberg Television interview.

Bank Controls

The measure is valued at 9.5 times projected 12-month earnings, compared with the seven-year average of 15.8, according to data compiled by Bloomberg. The gauge’s trading volumes were 1.8 percent lower than the 30-day average, while its 30-day volatility rose to 22.8 today, the highest level since March 20, the data show.

A gauge of financial shares in the CSI 300 Index lost 2.4 percent, the most among 10 industrygroups. Minsheng Banking sank 3.9 percent, the most since March 12, to 10.57 yuan. Haitong Securities lost 3.5 percent to 10.84 yuan.

Many banks have started to control the scale of loans for real estate development to coordinate with new property curbs, the China Securities Journal reported today. The China Banking Regulatory Commission is drafting guidelines on property loans including development loans and mortgages, the Journal reported, cited an unidentified person close to the regulator.

Yanzhou Coal

In a sign of further tightening of monetary supply, the central bank conducted 32 billion yuan ($5.2 billion) of 28-day repurchase operations today in which it drains funds from the banking system, according to a trader at a primary dealer required to bid at the auctions. The bank extracted 47 billion yuan from the market last week.

Yanzhou Coal sank 4.7 percent to 17.63 yuan, poised for the lowest close since March 7. The stock was cut to sell from hold at UOB Kay-Hian Ltd. yesterday even after the company reported higher-than-estimated full-year profit.

The company’s “better-than-expected results in 2012 were partly because of one-off tax breaks in Australia” that will not be repeated this year, Helen Lau, an analyst at UOB Kay-Hian Ltd. in Hong Kong, said by phone today.

Dongfeng Auto retreated 2 percent to 2.93 yuan after reporting a 95 percent slump in 2012 net income from a year earlier. Some 64 percent of Shanghai Composite Index companies posted annual profit that missed estimates, according to data on 171 earnings reports compiled by Bloomberg since Jan. 1.

‘Quite Bad’

“The 2012 profit reports are quite bad,” Zhang Haidong, an analyst at Tebon Securities Co., said by telephone from Shanghai. “We think earnings bottomed in the third quarter, meaning we could possibly see an improvement in first-quarter net income.”

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., retreated 0.3 percent to $36.82 in New York. The Bloomberg China-US 55 Index (CH55BN) fell 0.2 percent.

Trina Solar Ltd. (TSL) and Yingli Green Energy Holding Co. (YGE) sank more than 9 percent, as the bankruptcy of Suntech Power Holdings Co., once the world’s biggest solar-panel maker, stoked stock volatility. Trading in Ambow Education Holding Ltd. (AMBO) was suspended for a second day as a buyout offer for the education provider was withdrawn.

To contact Bloomberg News staff for this story: Weiyi Lim in Singapore atwlim26@bloomberg.net

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