China H Shares Fall as Coal Producers Drop After BNP Cuts Rating

By Bloomberg News

Photographer: Brent Lewin/Bloomberg

Speculation about the retirement of China central bank Governor Zhou Xiaochuan, a... Read More

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China’s stocks fell in Hong Kong, led by energy producers, after BNP Paribas SA reduced its recommendation on the nation’s shares and the government said it uncovered almost $10 billion of fraudulent trade.
China Shenhua Energy Co., Asia’s biggest coal producer, slid 1.3 percent after the China Securities Journal reported the government will allow four nuclear power projects to be built. Shanghai Electric (601727) Group Co., which makes generator equipment used in nuclear power plants, jumped by the 10 percent daily limit in Shanghai. Jiangxi Copper Co. declined in Hong Kong.
The Hang Seng China Enterprises Index (HSCEI) dropped 0.7 percent to 10,640.09 at the close. BNP Paribas cut its rating on the nation’s shares to neutral from overweight, saying in a note today broader stimulus doesn’t appear to be forthcoming despite
continuing weakness in the world’s second-largest economy. The country’s currency regulator said it detected fraud nationwide as part of an investigation begun in April last year, including many irregularities in the port of Qingdao.
“H shares are falling because investor concerns over China’s economy are creeping back,” Ryan Huang, a Singapore-based market strategist at IG Asia Pte Ltd. said by phone today.
The Shanghai Composite Index (SHCOMP) added less than 0.1 percent to 2,345.10, paring an earlier gain of 0.9 percent. The Hang Seng Index dropped 0.6 percent. The Hang Seng China AH Premium index climbed to 97.43, its highest level since May 12, signaling a narrowing gap between dual-listed stocks in Hong Kong and Shanghai.

Nuclear Plan

Shenhua Energy extended its loss this year to 2.5 percent. Shaanxi Coal Industry Co. dropped 2 percent in Shanghai. Shanghai Electric closed at its highest level since June 2012
Combined investment in the four coastal power plants may be about 160 billion yuan ($26 billion), the China Securities Journal said, citing unnamed analysts.
Jiangxi Copper slid 1.7 percent. Anhui Conch Cement Co. retreated to its lowest level in 11 months.
Companies “faked, forged and illegally re-used” documents for exports and imports, Wu Ruilin, a deputy head of the State Administration of Foreign Exchange’s inspection department, said at a briefing in Beijing. The trades have “increased pressure from hot money inflows and provided an illegal channel for criminals to move funds,” Wu said, adding that those involved in such fraud would be severely punished.

Exchange Link

Goldman Sachs Group Inc. cut its 2015 economic expansion target for China yesterday to 7.1 percent from 7.6 percent, while keeping this year’s estimate unchanged at 7.3 percent.
The H-share gauge has declined 1.6 percent this year and is valued at 6.8 times projected 12-months earnings, while the Shanghai Composite has risen 11 percent and trades at 8.5 times.
Shares in Shanghai have rallied before an exchange link with Hong Kong starts next month, which will allow a net 23.5 billion yuan ($3.8 billion) of daily cross-border purchases. China is counting on the link’s success to help liberalize its financial system, increase the role of the yuan and give its citizens more investment channels amid a slumping property market and increased risks from local wealth-management products.
A-share accounts containing assets climbed by 158,000 in the week ended Sept. 19 to 52.5 million, according to official securities data. Investors opened about 217,000 new accounts in the period, the most in more than two years, the data show.

Potential Successor

Speculation about the retirement of China central bank Governor Zhou Xiaochuan, a champion of shifting the world’s second-largest economy to greater reliance on markets, is resurfacing, focusing attention on potential successors.
With Zhou, 66, past the typical retirement age for senior officials and a Communist Party leadership meeting looming next month, social media chatter on his possible exit escalated. The Wall Street Journal said yesterday party boss Xi Jinping is considering replacing Zhou, citing unidentified officials. The China Times this month published an opinion piece on prospects for ex-securities regulator Guo Shuqing taking the job.
Six of 13 economists in a Bloomberg News survey this month cited Guo, 58, as the most likely successor when Zhou does leave. Five predicted it would be People’s Bank of China Deputy Governor Yi Gang, 56.