China’s Stocks Decline as Earnings Drag on Banks to Drugmakers

China’s stocks fell, heading for the first monthly loss since June, as consumer staple producers, drugmakers and banks declined. Property developers rallied.

Inner Mongolia Yili Industrial Group Co. slumped by the daily 10 percent limit and Guangzhou Baiyunshan Pharmaceutical Holdings Co. slid after the companies posted earnings. (SHCOMP) China Minsheng Banking Corp. fell 2.9 percent after net income trailed estimates. Poly Real Estate Group Co. led a gauge of property stocks to its biggest gain in three weeks after President Xi Jinping said China will accelerate building public housing.

The Shanghai Composite Index retreated 0.7 percent to 2,146.32 at 9:55 a.m. local time. The gauge has lost 1.3 percent in October. Earnings at the 252 companies in the measure tracked by Bloomberg that reported results so far this quarter have trailed analyst estimates by 6.1 percent.

“Earnings were generally worse than expected, which has dampened sentiment,” said Zeng Xianzhao, an analyst at Everbright Securities Co. in Chongqing.

The CSI 300 Index lost 1 percent to 2,384.41, while the Hang Seng China Enterprises Index (HSCEI) dropped 0.6 percent. The Bloomberg China-US Equity Index gained 0.5 percent in New York yesterday. The Shanghai index trades at 8.5 times projected profits for the next 12 months, lower than the seven-year average of 15.4.

The nation’s top four banks posted their biggest increase in soured loans since at least 2010. Nonperforming loans at Industrial & Commercial Bank of China Ltd. (1398), China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. rose 3.5 percent in the three months to Sept. 30 from June to a combined 329.4 billion yuan ($54 billion), according to data compiled by Bloomberg News.

China’s interest-rate swaps and benchmark money-market rate rose to four-month highs yesterday even after the central bank injected funds for the first time in almost two weeks Oct. 29.

(Source: Bloomberg)