China��s stocks fell for a third dayas a cash crunch weighed on equities after banks hoarded cash tomeet year-end reserve-ratio requirements and Ping An Insurance(Group) Co. (601318) plunged on fundraising plans.
Ping An, China��s second-biggest insurer, slid 5.2 percenton a plan to sell as much as 26 billion yuan ($4.1 billion) ofbonds after business expansion brought down its capitaladequacy. China Vanke Co. led a decline for developers as citiesincluding Shanghai extended the period limiting home purchases.Chongqing Brewery Co. (600132) climbed for the first time in 10 daysafter its third-biggest shareholder sought to remove thecompany��s chairman as director.
��The economy and the capital markets are still facing acredit crunch as a result of two years of monetary tightening,��said Wang Zheng, Shanghai-based chief investment officer atJingxi Investment Management Co., which manages about $120million. ��The economy is experiencing a down cycle. Stocks arenot a place to put money until economic growth picks up again.��
The Shanghai Composite Index (SHCOMP) fell 1.1 percent to 2,191.15at the close. It rose as much as 1 percent after Premier Wen Jiabao pledged to help exporters and small companies. The CSI300 Index (SHSZ300) slid 1.6 percent to 2,339.11. The Bloomberg China-US55 Index, the measure of the most-traded U.S.-listed Chinesecompanies, jumped 3 percent at the close in New York yesterday.
Bucking Trend
China��s stock market was an outlier in the region today,with the MSCI Asia Pacific Index advancing 2.1 percent afterU.S. builders broke ground in November on the most houses inover a year and German business confidence unexpectedly rose fora second month in December. Housing starts grew 9.3 percent to a685,000 annual rate, exceeding the highest estimate ofeconomists surveyed by Bloomberg News and the highest levelsince April 2010, Commerce Department figures showed.
The Shanghai Composite has fallen 6.1 percent in Decemberas concern about an economic! slowdow n overshadowed the first cutin reserve requirement ratios in three years on Nov. 30.The index trades at an estimated price-earnings ratio of 10.5times, a record low, according to weekly data compiled byBloomberg that began to track the multiple since 2006. For theyear, the measure is down 22 percent after the central bankraised interest rates three times to curb inflation and exportsto Europe slowed because of the region��s debt crisis.
Ping An slumped 5.2 percent to 34.43 yuan. The proceedsfrom the sale of six-year convertible bonds will be used toboost working capital, Ping An said in a statement.
Repo Rate
The sale will erode liquidity in the capital markets andwill boost Ping An��s equity base by about 9 percent if the bondsare converted into stocks, Sun Ting, an analyst at Shenyin &Wanguo Securities Co., wrote in a report today.
The seven-day repurchase rate, a gauge of fundingavailability in the financial system, rose 36 basis points, or0.36 percentage point, to 3.60 percent as of 3:16 p.m. inShanghai, according to a weighted average compiled by theNational Interbank Funding Center.
��It��s the year-end effect,�� said Ju Wang, a Singapore-based senior strategist at Barclays Capital. ��Demand for cashwill increase as people prepare for the Chinese holidays andthis will tighten liquidity.��
China��s financial markets will be closed on Jan. 2-3 forpublic holidays. Chinese New Year starts on Jan. 23.
The nation will keep its export policies such as taxrebates ��basically stable�� next year and the government willmainly use fiscal spending to support ��structural tax cuts,��Premier Wen was cited as saying in a statement posted on thecentral government��s website yesterday. Slowing growth andelevated prices are adding to the difficulty in managing theeconomy, he said.
Property Curbs
A gauge of 34 property stocks in the Shanghai CompositeIndex dropped 1.9 percent, its first decline in four days.Vanke, the nation��s biggest listed prope! rty deve loper, fell 2.7percent to 7.30 yuan. Poly Real Estate Group Co., the secondbiggest, lost 1.7 percent to 9.91 yuan. China Merchants PropertyDevelopment Co. (000024) retreated 3.1 percent to 17.49 yuan.
Shanghai will continue to implement home purchase limitsnext year, the city government said yesterday, joining Qingdao,Guangzhou and Shenzhen in making similar moves.
Property sales may fall between 3 percent and 6 percentnext year and average prices are likely to fall between 1percent and 4 percent, Soufun Holdings Ltd., the country��sbiggest real estate website owner, said in a statement.
Pension Fund Buying
China��s national pension fund invested at least 10 billionyuan ($1.58 billion) in 20 stock funds last week, ShanghaiSecurities News reported today, without saying where it got theinformation. Dai Xianglong, chairman of the National Council forSocial Security Fund, suggested that local social security fundsbe allowed to buy equities, the newspaper said yesterday.
Chongqing Brewery gained 0.7 percent to 31.61 yuan. Thebeermaker and medicine company agreed to hold an extraordinarygeneral meeting on Feb. 7 to discuss a proposal by Dacheng FundManagement Co. to remove Chairman Huang Minggui as director, thecompany said in a statement.
The shares slumped by the daily limit of 10 percent in eachof the past nine days after the company released on Dec. 8 areport on a Hepatitis B vaccine it is researching. The vaccinemay be a ��high risk�� and ��capital intensive�� investment,Chongqing Brewery said in the report.
--Zhang Shidong. With assistance from Kyoungwha Kim in Beijing.Editors: Allen Wan, Richard Frost
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