China’s stocks fell for the firsttime in five days amid conflicting data on the nation's services industry and before a Communist Party leadership congress and U.S. presidential elections this week.
Jiangxi Copper Co. led declines for metal producers after agauge of raw materials slid by the most in a month on Nov. 2.Kweichow Moutai Co. (600519), China’s largest maker of baijiu liquor,sank 2.2 percent, pacing a drop among consumer stocks onspeculation sales will slow. BYD (002594) Co., an automaker, jumped 3.3percent after after the city of Shanghai submitted a subsidyplan for new energy vehicles to the national government.
The Shanghai Composite Index (SHCOMP) lost 0.1 percent to 2,114.03at the close. A services purchasing managers’ index released byHSBC Holdings Plc and Markit Economics dropped to 53.5 inOctober from 54.3 the previous month. That contrasts with aseparate PMI from the National Bureau of Statistics and ChinaFederation of Logistics and Purchasing on Nov. 3 that showed ajump to 55.5 last month from September’s 53.7.
“With the U.S. and China changing leadership, investorsare more risk averse,” said Xu Shengjun, an analyst at JianghaiSecurities Co. in Shanghai. “There’s much uncertainty for theeconomy before the congress. Data such as the non-manufacturingPMI is one-off and only shows that the economy is more stable,it doesn’t mean it is going to rebound. At best, we will see ashort-term gain in stocks now, but any increase is temporary.”
Slim Lead
The Communist Party will start on Nov. 8 its 18th Congresswhen 2,270 delegates meet over several days to decide onleadership changes that will probably see Xi Jinping replace Hu Jintao as general secretary of the party that’s ruled Chinasince 1949. In the U.S., national and state-level data showPresident Barack Obama with a slim lead in the quest for theElectoral College votes needed to win this week’s election.The CSI 300 Index (SHSZ300) sank 0.2 percent to 2,301.88 today, whilethe Hang Seng China
Enterprises Index (HSCEI) of Chinese companiestraded in Hong Kong fell 0.3 percent. The Bloomberg China-USEquity Index slipped 1.1 percent on Nov. 2.
Trading volumes in the Shanghai Composite exceeded the 30-day average for this time of day by 7.2 percent, data compiledby Bloomberg show. Thirty-day volatility in the gauge was at16.4, lower than this year’s average of 17.2.
The Shanghai Composite has gained 1.3 percent over the pastmonth, narrowing this year’s slump to 3.9 percent, as reports onmanufacturing and industrial earnings signal the economy isbottoming. The gauge trades at 9.7 times estimated profit,compared with the 17.8 average multiple since Bloomberg begancompiling the weekly data in 2006.
Buying Opportunity
“Investors are not that much concerned about theconflicting data,’” Daphne Roth, Singapore-based head of Asiaequity research at ABN Amro Private Banking, which overseesabout $207 billion, said in a phone interview. “If you look atall the data, there is improvement and that’s more important. Iwould take this as an opportunity to accumulate, rather than asa signal to sell.”Hu Deping, the son of China’s late Communist Party chief Hu Yaobang, called on leaders of the world’s most populous nationto pursue political and economic changes on the eve of theleadership transition. The nation’s central bank said on Nov. 2the economy is expected to maintain “steady and relativelyrapid growth” as earlier government policies to supportexpansion take effect.
The People’s Bank of China’s quarterly monetary policyreport suggests policy easing will continue and may even pick upspeed, Zhang Zhiwei, Nomura Holdings Inc.’s chief Chinaeconomist, wrote in a report e-mailed on Nov. 2.
Commodity Slump
Jiangxi Copper, the nation’s biggest producer of the metal,slid 1.7 percent to 21.23 yuan. Yunnan Copper Industry Co.slumped 1.2 percent to 15.40 yuan.Copper for delivery in three months lost 0.5 percent to$7,634.75 a metric ton on the London Metal Exchange today. TheThomson Reuters/Jefferies CRB Index of raw materials retreated1.6 percent on Nov. 2, the biggest drop in a month. Hedge fundscut bullish wagers on commodities by the most since June asprices retreated to a three-month low on mounting concern thatEurope’s debt crisis will worsen and U.S. growth slow.
Kweichow Moutai, which jumped a combined 13 percent inSeptember and October, lost 2.2 percent to 242.92 yuan today.Wuliangye Yibin Co.. the second-largest baijiu maker, retreated2.2 percent to 33.69 yuan. Investors are selling shares of theliquor makers because of speculation fourth-quarter sales may bedisappointing and on concern recent rallies were excessive, saidWang Ping, a Great Wall Securities Co. analyst in Shenzhen.
BYD, an electric-car maker that is part-owned by WarrenBuffett’s Berkshire Hathaway Inc., advanced 3.3 percent to 15.20yuan. Shanghai has submitted its subsidy plan for new energyvehicles to the National Development and Reform Commission, theOriental Morning Post reported today, citing an unidentifiedofficial with the local government.
Cheaper Options
The cost of protecting against losses in Chinese stocksrelative to U.S. equities fell to a one-year low on prospectsthe slowdown in the world’s second-largest economy will ease.The AlphaShares Chinese Volatility Index, derived from optionson companies listed in Hong Kong, traded at 18.61 on Oct. 31, 1percentage point above the Chicago Board Options ExchangeVolatility Index and the smallest gap since September 2011. Thepremium has narrowed from as much as 1.43 percent on Sept. 9.The iShares FTSE China 25 Index Fund (FXI), the biggest Chineseexchange-traded fund in the U.S., gained 1.4 percent last week.
To contact the reporter on this story:Weiyi Lim in Singapore at wlim26@bloomberg.net
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