Most China stocks fell, with the benchmark index erasing gains, as banks slid after lower-than- estimated inflation failed to ease concerns of more tightening. Commodity producers rose after metal and oil prices climbed.
Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, sank 0.7 percent. Consumer prices rose 4.9 percent last month from a year earlier, as prices excluding food surged the most in at least six years. Jiangxi Copper Co. climbed 3.2 percent after copper rallied to a record while Huaxin Cement Co. jumped to a three-year high after China International Capital Corp. said prices of the building material will increase.
About 10 stocks fell for every seven that rose on the Shanghai Composite Index, which added 0.1, or less than 0.1 percent, to 2,899.24 at the 3 p.m. close. The index jumped 2.5 percent yesterday as export growth exceeded estimates. The CSI 300 Index lost 0.1 percent to 3,217.67 today.
“The figure was mainly priced into the market yesterday after rumors suggested CPI would be less than 5 percent,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “The government will still need to continue monetary tightening throughout the year which will drag on stocks.”
China’s January consumer-price index compares with a 4.6 percent gain in December and the median estimate of 5.4 percent in a Bloomberg News survey of 27 economists. China cut the weighting of food in the consumer price index by 2.21 percentage points, the statistics bureau said today, without giving the new weighting.
Data ‘Fudging’
Non-food prices rose 2.6 percent from a year earlier, the statistics bureau said today. Producer-price inflation accelerated to 6.6 percent from 5.9 percent in December, it said.
“The change in the weighting of food in the CPI basket suggests a fudging of the numbers,” said Jamie Coutts, sales manager at brokerage BGC Partners in Singapore. “It doesn’t change the overall outlook that inflation remains a problem for China.”
A measure of financial stocks slid 0.7 percent, the biggest contributor to losses among the CSI 300’s 10 industry groups. ICBC dropped 0.7 percent to 4.34 yuan. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., fell 0.8 percent to 13.03 yuan.
New lending was 1.04 trillion yuan in January, the People’s Bank of China said today. That’s less than the median estimate of 1.2 trillion yuan （$157.8 billion） in the survey of Bloomberg survey. M2, the broadest measure of money supply, rose 17.2 percent, according to the central bank.
Rate Concern
China will announce more three more increases in interest rates over the next six months amid faster economic growth and inflation, said Donald Straszheim, head of China research at International Strategy & Investment Group. He’s predicting the government will order banks to boost reserve requirements four more times over the next “several months.”
China Vanke Co., the nation’s biggest listed property developer, retreated 0.2 percent to 8.58 yuan. Gemdale Corp. lost 1.3 percent to 7.01 yuan.
The government may raise the interest rate on existing mortgages for second homes to 1.1-1.2 times the benchmark rate under a trial program in Beijing and Shanghai, the 21st Century Business Herald reported today, citing an unidentified person close to banks. The previous mortgage rate for second homes was discounted 15 to 30 percent from the benchmark rate, according to the newspaper.
Annual Loss
The Shanghai gauge plunged 14 percent in 2010 after the government ordered banks to set aside more reserves six times and boosted interest rates twice to tame inflation. The central bank increased borrowing costs for a third time in four months last week.
The benchmark index has advanced 3.2 percent this year on signs the economy is withstanding curbs on lending and property purchases. Exports rose 38 percent in January from a year earlier, compared with the 22.5 percent median estimate among economists surveyed by Bloomberg, a government report showed yesterday.
Jiangxi Copper, the country’s biggest copper producer, advanced 3.2 percent to 42.34 yuan, a one-month high. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal and also called Chalco, climbed 4.3 percent to 11.38 yuan.
The London Metal Exchange Index of prices for six industrial metals including copper and aluminum climbed 1.8 percent yesterday, the most this month. Copper for delivery in three months increased to a record of $10,168.50 a metric ton in London.
Cement Prices
Huaxin Cement, the Chinese affiliate of Holcim Ltd., gained 4.4 percent to 37.94 yuan, the highest close since January 2008. Anhui Conch Cement Co., China’s biggest cement maker, rose 0.4 percent to 33.91 yuan, extending yesterday’s 8.2 percent jump.
Demand will help boost prices while companies including Anhui Conch and Huaxin Cement may report more than a 50 percent increase in first-quarter profit, Luo Wei and Guan Xue, analysts at CICC wrote in a report dated yesterday.
Nomura Holdings Inc. is turning “bullish” on China’s stocks as “inexpensive” valuations and money supply growth favor equities even as interest rates increase, said Sean Darby, a Hong Kong-based strategist.
Growth in money supply “is still supportive for asset prices” even with three increases in borrowing costs since mid- October, said Darby, whose brokerage was ranked first by Institutional Investor magazine in its All-China Research Team poll last year. Nomura had an “bearish” rating for the nation’s equities since November.
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