China’s Stocks Drop, Led by Banks; Moutai Rises Before Earnings

By Bloomberg News

Chinese stocks fell, led by banks, on speculation new lending will slump this month. Kweichow Moutai Co. led consumer-staples higher before the release of its first-quarter earnings today.

China Minsheng Banking Corp. (600016), the nation’s first privately owned bank, slid 4 percent after the China Securities Journal said new lending may slide to 800 billion yuan ($129.4 billion) this month. Jinduicheng Molybdenum Co. dropped 1.5 percent after profit fell. Liquor maker Kweichow Moutai advanced to a one- month high as Fortune CLSA Securities Ltd. said the company was a top stock pick. Hisense Electric Co. (600060) climbed 5.7 percent after reporting higher first-quarter profit.

The Shanghai Composite Index (SHCOMP) slid 0.7 percent to 2,180.51 as of 1:06 p.m. local time. The CSI 300 Index fell 0.8 percent to 2,440.17. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 0.7 percent.

“China’s banks will suffer from falling demand for loans as the old growth model of relying on investment cannot be sustained,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “While fundamentals for liquor makers are still under pressure because of the government crackdown on corruption, big corrections in share prices may lead to rebounds at any time.”

The Bloomberg China-US 55 Index (CH55BN), the measure of the most- traded U.S.-listed Chinese companies, added 1.8 percent in New York yesterday. U.S. stocks rose after gold prices rebounded and earnings from Coca-Cola Co. to Johnson & Johnson topped estimates.

Bank Loans

The Shanghai index has fallen 10 percent from a Feb. 6 high amid concern measure to coolproperty prices will hurt economic growth. Valuations on the gauge dropped to 8.9 times projected 12-month earnings yesterday, the lowest level since Dec. 13 and less than the seven-year average of 15.8, data compiled by Bloomberg show.

A gauge of financial stocks in the CSI 300 slid 1.6 percent, the most among 10 industry groups. Minsheng Banking led losses for lenders, falling 4 percent to 9.14 yuan. Industrial Bank Co. declined 2.2 percent to 16.91 yuan.

New loans may be 800 billion yuan ($129.4 billion) this month, the China Securities Journal reported today, citing Shenyin & Wanguo Securities Co. New lending was 1.06 trillion yuan in March, according to the central bank.

Foreign investors may continue to short Chinese banks in the near term, the China Securities Journal reported, citing an unidentified person from the private equity industry.

Jinduicheng Molybdenum, Asia’s largest producer of the metal used to harden steel, lost 1.5 percent to 10.19 yuan after profit dropped 53 percent in the first three months.

1Q Earnings

Listed companies are required to release first-quarter earnings reports by the end of the month. Everbright Securities Co. will join Kweichow Moutai and Chongqing Changan Automobile Co. in reporting earnings after the market closes.

Hisense Electric jumped 5.8 percent to 14.81 yuan after first-quarter net income increased 56 percent.

Moutai, the biggest maker of baijiu liquor, rose 2.5 percent to 177.44 yuan, paring its loss this year to 15 percent that have been spurred by concern a government crackdown on extravagant spending will curb demand for high-priced alcohol.

Chinese A-share companies’ earnings may have a “gloomy start” to the year, with machinery, retail and environmental shares likely to disappoint, according to Fortune CLSA Securities.

IMF Projection

Property companies will report “solid” earnings after a recovery in prices and volumes in the second half of 2012, CLSA said, adding it’s “most confident” on technology stocks. CLSA likes Chinese health-care companies, technology shares and consumer shares such as Kweichow Moutai. CLSA’s other top picks are Gree Electric Appliances Inc., Yunnan Baiyao Group Co. and Hangzhou Hikvision Digital Technology Co.

The International Monetary Fund cut China’s growth forecast for this year yesterday to 8 percent from 8.2 percent. The Washington-based lender reduced its global economic growth projection to 3.3 percent, from a January prediction of 3.5 percent.

“The market is in the process of adjusting to the slower growth rate,” Michael Ding, lead manager of the China Region Fund at U.S. Global Investors Inc., which oversees $2.2 billion, said by phone from San Antonio, Texas. “In the short term, the market has opportunities to go up. There won’t be further tightening because of the weak growth and the market is cheap.”

Property Data

China’s statistics bureau is schedule to release March property prices tomorrow. New home prices posted the broadest advance since December 2011 in February, according to the agency.

Chinese stocks in New York rebounded from a seven-month low, on speculation slower economic growth will deter policy makers from tightening monetary policy. China Eastern Airlines Corp. jumped 8.9 percent, while budget hotel chain Home Inns & Hotels Management Inc. rose the most in eight months. LDK Solar Co. dropped after missing a debt payment while Suntech Power Holdings Co. surged 16 percent.

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai atszhang5@bloomberg.net

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