Most Chinese stocks rose, paring the benchmark index’s biggest weekly loss in two months, as an increase in US building permits overshadowed concerns about slowing corporate earnings growth.
EGing Photovoltaic Technology paced gains among companies reliant on overseas sales. CSR, the nation’s biggest train maker, advanced the most in five weeks after it won contracts worth 12.7 billion yuan ($2 billion). Yunnan Copper Industry dropped for a third day after first-half profit fell. Consumer staple and health-care companies, the CSI 300 Index’s best performers this year, declined.
“The Europe and the US will provide a stable external environment to us as their economies may have seen the worst,” said Wei Wei, an analyst at West China Securities in Shanghai. “Corporate earnings haven’t hit bottom and may get even worse in the third and fourth quarters.”
The Shanghai Composite Index rose 0.1 percent to 2,114.89 at the close. About seven stocks gained for every five that dropped in the gauge, which changed directions at least 20 times today. The CSI 300 Index declined 0.3 percent to 2,313.48.
The Shanghai Composite lost 2.5 percent this week, the biggest decline for the five days to June 8, after banks including Bank of America cut forecasts for China’s economic growth. The index tumbled 14 percent from this year’s high on March 2 through yesterday amid concern the economic slowdown is worsening. The gauge is valued at 9.5 times estimated profit, compared with the 17.4 average since Bloomberg began compiling the data in 2006.
The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong, climbed 1.1 percent today. The Bloomberg China-US 55 Index, the measure of the most-traded US-listed Chinese companies, fell 0.9 percent in New York yesterday.
Solar stocks
Exporters advanced after data showed US building permits rose to an 812,000 annual pace, the most since August 2008. Permits were projected to increase to 769,000, according to the median estimate of 52 economists surveyed by Bloomberg.
EGing Photovoltaic jumped 2.7 percent to 9.55 yuan. The maker of solar panels derived 62 percent of sales from overseas last year, according to data compiled by Bloomberg.
Shanghai Chaori Solar Energy Science & Technology advanced 2.8 percent to 5.11 yuan. Zhejiang Sunflower Light Energy Science & Technology climbed 3.3 percent to 6.36 yuan.
In Europe, German Chancellor Angela Merkel said the European Central Bank’s insistence on conditionality in return for help to lower borrowing costs in indebted countries matches her country’s priorities to end the crisis in the euro region.
Europe and the US are China’s two biggest export markets, making up about 35 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.
Commodity stocks
CSR gained 2.6 percent to 4.31 yuan, the steepest advance since July 11. The 12.7 billion yuan contracts are equivalent of 15.7 percent of the company’s 2011 revenue, CSR said in a statement yesterday.
Thirty-day volatility on the Shanghai index was at 12 today, compared with this year’s average of 17.5. About 4.3 billion shares changed hands in the gauge today, the lowest level since December 26.
Yunnan Copper, China’s fourth-biggest producer of the metal, retreated 0.7 percent to 16.73 yuan after it said first- half net income dropped 53 percent from a year earlier.
Inner Mongolia Baotou Steel Rare-Earth Hi-Tech, China’s biggest producer of rare earth, fell 1.3 percent to 37.62 yuan. The National Business Daily reported today the company asked its units to halt production.
Profit estimates
The Chinese nonferrous metal industry’s first-half profit slumped 14 percent from a year earlier, while earnings for the steel industry fell 49 percent, the National Development and Reform Commission said in a statement yesterday.
Second-quarter profits for 57 percent of the 94 Shanghai Composite companies for which Bloomberg compiles earnings forecasts missed analyst projections, while 40 percent beat, the data show.
Measures of consumer staple and health-care stocks in the CSI 300 slid 2.6 percent and 1.5 percent today, the biggest declines among the 10 industry groups. They have gained 4.3 percent and 7.6 percent this year, respectively.
Kweichow Moutai, China’s biggest producer of baijiu liquor by market value, retreated 4 percent to 229.62 yuan. Yunnan Baiyao Group, a manufacturer of traditional Chinese medicines, lost 3.1 percent to 61.02 yuan.
Investors were taking breather as consumer and health-care stocks rose a lot this year, said Wei of West China Securities.
Rate outlook
The People’s Bank of China may decide to cut benchmark interest rates before required reserve ratios for lenders to gradually guide funds to flow to the real economy, according to a front-page article in the Securities Times today. The central bank is avoiding cutting reserve ratio, which has a longer period of impact, it said.
“The market is basically fighting between the poorer-than- expected economic data and the potential for stimulus that could come, the two forces that are affecting daily moves,” Sam Mahtani, who oversees about $5 billion as director of emerging markets at F&C Asset Management Plc in London, said by phone yesterday.
Policy makers cut interest rates in June and July after two reductions in banks’ reserve-requirement ratios this year to bolster growth. China’s exports grew 1 percent in July after climbing 11.3 percent in June, data showed last week. Foreign direct investment declined 8.7 percent in July from a year earlier to $7.58 billion, the smallest inflow in two years, Commerce Ministry data showed yesterday.
