Stocks fall for 3rd day, reg­is­ter big­gest drop in six weeks

De­cline due to con­cerns about sus­tain­abil­ity, but some ob­servers think in­vestors just tak­ing a breather

China Daily (Canada) - - BUSINESS - By BLOOMBERG

Chi­nese stocks fell the most in six weeks, led by fi­nan­cial and en­ergy com­pa­nies, amid con­cerns that re­cent gains were ex­ces­sive rel­a­tive to growth prospects.

In­dus­trial & Com­mer­cial Bank of China Ltd, the na­tion’s largest lender, slid 1.7 per­cent, while PetroChina Co, the big­gest oil com­pany, suf­fered its big­gest drop in two months. SAIC Mo­tor Corp and Ts­ing­tao Brew­ery Co de­creased by more than 2 per­cent as con­sumer com­pa­nies slumped be­fore Fri­day’s trade data.

The Shang­hai Com­pos­ite In­dex fell for a third day, slid­ing 1.3 per­cent to 2,187.67 at the close, the big­gest drop since June 19. The los­ing streak comes af­ter the in­dex rose 9.9 per­cent from the June 19 low throughMon­day, send­ing valu­a­tions to the high­est lev­els since De­cem­ber in the big­gest rally among global eq­uity in­dexes.

The gauge will prob­a­blyend its rally within days and fall about 10 per­cent, Tom De­Mark, the de­vel­oper of mar­ket-tim­ing in­di­ca­tors, said early this week.

Gerry Al­fonso, a trader at Shenyin& Wanguo Se­cu­ri­ties Co in Shang­hai, said in an e-mail: “It seems that there wasn’t a con­sen­sus among in­vestors re­gard­ing the sus­tain­abil­ity of the rally.

“While the long-term out­look for the mar­ket re­mains pos­i­tive, it seems clear that a sig­nif­i­cant amount of in­vestors have de­cided that now is the time to take prof­its in some of these stocks. It seems that some in­vestors wanted to make sure that the rally was over be­fore sell­ing.”

The Hang Seng China En­ter­prises In­dex, also known as the H-share in­dex, slipped 0.94 per­cent. The CSI 300 In­dex closed down 1.3 per­cent.

The Shang­hai in­dex swung be­tween gains and losses at least 10 times on Thurs­day as 10-day volatil­ity reached the high­est lev­els since April. Price swings fell to a record low on July 8.

The mea­sure of China’s $3.5 tril­lion stock mar­ket has out­per­formed eq­uity in­dexes in 46 emerg­ing and de­vel­oped coun­tries in the past six weeks. Signs of mone­tary eas­ing, ac­cel­er­ated govern­ment spend­ing and gains in man­u­fac­tur­ing spurred spec­u­la­tion the na­tion’s eco­nomic growth will pick up.

July eco­nomic data to be re­leased dur­ing the next week, start­ing with Fri­day’s trade fig­ures, will give a sense of how well growth is hold­ing up af­ter ac­cel­er­at­ing to 7.5 per­cent in the sec­ond quar­ter from a year ear­lier. The sta­tis­tics bureau re­leases in­fla­tion fig­ures on Satur­day, fol­lowed by in­dus­trial pro­duc­tion, fixed-as­set in­vest­ment and re­tail sales nex­tWed­nes­day.

Ex­ports prob­a­bly rose 7 per­cent last month, com­pared with growth of 7.2 per­cent in June, ac­cord­ing to ame­di­anes­ti­mate of 44 econ­o­mists sur­veyed by Bloomberg.

“We ex­pect trade data to be pos­i­tive,” said Wei­Wei, an an­a­lyst atWest China Se­cu­ri­ties Co in Shang­hai. “In­vestors are just tak­ing a breather af­ter a strong rally. This is just tem­po­rary. Gains will con­tinue.”

Mea­sures of en­ergy and con­sumer-sta­ples shares in the CSI 300 each dropped 1.9 per­cent, the big­gest losses among 10 in­dus­try groups. The sub-in­dexes have ral­lied at least 7.8 per­cent in the past­mon­th­for the best per­for­mance among the groups af­ter ma­te­ri­als.

Ts­ing­tao Brew­ery dropped 4.1 per­cent in Shang­hai and fell 2.3 per­cent in­HongKong. In­ner Mon­go­lia Yili In­dus­trial Group Co de­clined 3.1 per­cent. PetroChina slid 1.5 per­cent, while coal pro­ducer Win­time En­ergy de­creased 6.9 per­cent, par­ing a rally to 68 per­cent since July 22.

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