China Stocks Drop to 7-Week Low as PBOC Fails to Cut Money Rates

China Stocks Drop to 7-Week Low as PBOC Fails to Cut Money Rates

Chinese stocks fell, dragging the benchmark gauge to the lowest level in seven weeks, as small companies plunged and the central bank’s first cash injection in two weeks failed to reduce money-market rates. Tsinghua Tongfang Co., a maker of personal computers, tumbled 6.5 percent to lead losses among technology companies. The ChiNext index of Shenzhen-listed companies sank 4.7 percent, the most since June 24. The fixing on the seven-day money-market rate rose seven basis points to 5 percent. A gauge of financial shares pared its rally to 1.3 percent after gaining 3.6 percent.The Shanghai Composite Index (SHCOMP) fell 1.1 percent to 2,111.13 at the 11:30 a.m. break, reversing an advance of 1.4 percent. The People’s Bank of China added 13 billion yuan ($2.1 billion) using seven-day reverse-repurchase agreements today, according to a trader at a primary dealer required to bid at the auctions.

“We were rising in the morning because of the reverse repo, but after pricing that in, we have to note the market is still in a weak mode,” said Zhang Haidong, analyst at Tebon Securities Co. in Shanghai. “Liquidity is still tight.”

Trading volumes were 2.3 percent below the 30-day average for this time of day, after falling to the lowest level in two months yesterday, according to data compiled by Bloomberg. Earnings at the 146 companies in the Shanghai gauge tracked by Bloomberg that reported results so far this quarter have trailed analyst estimates by 5.7 percent.

The CSI 300 Index dropped 0.6 percent to 2,351.34. The Hang Seng China Enterprises Index (HSCEI) of mainland companies traded in Hong Kong climbed 0.5 percent after rallying 1.6 percent. The Bloomberg China-US Equity Index fell 1.2 percent in New York yesterday.

Annual Loss

The Shanghai index has retreated 7 percent this year on concerns a slowing economy will hurt profit growth and the government will introduce measures to curb gains in property prices. The measure has lost 2.9 percent this month, poised for the first decline since June, and trades at 8.4 times projected profits for the next 12 months. That’s lower than the seven-year average of 15.4.

Chinese Politburo member Yu Zhengsheng said reforms to be discussed at a Communist Party meeting next month will be “unprecedented,” according to an Oct. 26 report by Xinhua News Agency that didn’t mention specific policies.

The government may start trialling the issue of preferred shares in industries including banks and electricity producers, the China Securities Journal reported.

PetroChina Co. and China Petroleum & Chemical Corp. are due to release third-quarter net income today.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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