Shares hit by profit tak­ing and un­cer­tainty over poli­cies

China Daily (Hong Kong) - - BUSINESS DIGEST - By WU YIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

Chi­nese eq­ui­ties posted their largest one-day loss in a month on Wed­nes­day, with the CSI300 in­dex of the lead­ing Shang­hai and Shen­zhen A-share list­ings slid­ing 1.7 per­cent to 2,412.8 points.

The Shang­hai Com­pos­ite In­dex sank 1.5 per­cent and stayed un­der its 20-day mov­ing av­er­age for a third straight ses­sion.

An­a­lysts said that some in­vestors took prof­its on re­cent out­per­form­ing shares, es­pe­cially fi­nan­cial in­sti­tu­tions (ex­clud­ing banks), en­ergy com­pa­nies and ce­ment producers.

China Shen­hua En­ergy Co Ltd and China Coal En­ergy Co Ltd, the na­tion’s big­gest coal producers, each de­clined about 2 per­cent. Wors­en­ing smog in many parts of the coun­try has prompted gov­ern­ment plans to curb coal con­sump­tion.

The polit­buro meet­ing on Dec 3, which tra­di­tion­ally fore­shad­ows the Cen­tral Eco­nomic Work Con­fer­ence, set the tone for main­tain­ing sta­bil­ity while push­ing for re­forms.

The meet­ing called for ex­pand­ing do­mes­tic de­mand, pro­mot­ing new con­sump­tion growth driv­ers and fos­ter­ing rea­son­able in­vest­ment growth.

The meet­ing also noted the need to pay close at­ten­tion to en­vi­ron­men­tal man­age­ment and pro­tec­tion, ac­cord­ing to a re­port from Bar­clays Re­search.

Con­cerns over changes in eco­nomic poli­cies that might be made dur­ing the CEWC, which started on Tues­day, could also be af­fect­ing in­vestor sen­ti­ment, said an­a­lysts.

“Un­cer­tainty over the eco­nomic growth tar­get for 2014 may have a short-term neg­a­tive im­pact on some shares,” said a note from Haitong Se­cu­ri­ties Co Ltd on Wed­nes­day.

Eco­nomic tar­gets de­cided at the CEWC are usu­ally an­nounced in March of the fol­low­ing year. In­vestors may ex­pect a com­mu­nique at the end of the meet­ing, which ends Thurs­day, to sig­nal de­ci­sion­mak­ers’ re­form pri­or­i­ties for 2014.

While his­tor­i­cally the eco­nomic growth tar­get tends to be on the con­ser­va­tive side and ac­tual growth has al­ways ex­ceeded the tar­get by a wide mar­gin, it has be­come clear that achiev­ing 7.5 per­cent growth is no longer easy for the coun­try, ac­cord­ing to Chang Jian, econ­o­mist with Bar­clays Re­search.

“The pru­dent mone­tary pol­icy stance will likely be main­tained, but tight­en­ing has al­ready started,” said Chang.

The av­er­age seven-day in­ter­bank re­pur­chase rate has in­creased to 4.5 per­cent from 3.8 per­cent in Septem­ber and 4.3 per­cent in Oc­to­ber. The 10-year gov­ern­ment bond yield rose to a nine-year high of 4.7 per­cent in Novem­ber.

In­vestors may also be re­act­ing to yearend set­tle­ment trans­ac­tions and the re­sump­tion of ini­tial pub­lic of­fer­ings, but macroe­co­nomic data is show­ing a pos­i­tive trend, ac­cord­ing to Sun Jianbo, an­a­lyst with China Galaxy Se­cu­ri­ties Co Ltd.

In­no­va­tions in the cap­i­tal mar­ket and open­ing up will be long-term pos­i­tive forces for the A-share mar­ket, Sun said.

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