China H-Shares Drop as Energy Companies Slip, Great Wall Slumps

(Bloomberg) -- Chinese shares listed in Hong Kong fell the most in two weeks, dragged down by energy companies on a plunge in oil prices. Great Wall Motor Co. slumped the most since January as its net income was seen missing estimates.

The Hang Seng China Enterprises Index lost 1.1 percent as of the midday break, with China Oilfield Services Ltd. and PetroChina Co. among the biggest decliners as crude sank for a third day on speculation Russia won’t join OPEC’s planned output cuts. Great Wall Motor tumbled 11 percent amid a series of rating downgrades, with Sanford C Bernstein & Co. saying the automaker’s third-quarter net income missed estimates. The Shanghai Composite Index was set to end three days of gains that took it to its highest level since January.

The H-share gauge has slipped more than 3 percent since reaching a nine-month high in September as inflows from mainland investors through a link with Shanghai slowed to less than $1 billion so far in October, from a record $8 billion in September. The People’s Bank of China is planning to add extra oversight to lenders’ off-balance-sheet wealth management products, a pool that Citigroup Inc. estimates at 13 trillion yuan ($1.9 trillion). Reported curbs on the use of WMP proceeds to buy equities sparked a stock plunge in late July.

"The momentum on H shares is receding now as stocks have already been pushed to a relatively high level,” said Wei Wei, an analyst at Huaxi Securities Co. in Shanghai. "The appeal is dwindling. The economy isn’t likely to pick up significantly this year and it’s still in an L-shaped range."

The Hang Seng China Enterprises Index was last at 9,733.84. The Hang Seng Index lost 0.7 percent, while the Shanghai Composite Index dropped 0.4 percent.

Early indicators of China’s economy for October have presented a mixed picture, with confidence among small and medium-sized companies holding up, while larger firms are less confident in the outlook. With the economy expanding at 6.7 percent in the first three quarters, policy makers are pledging to curb debt expansion and rein in surging home prices in the nation’s biggest cities. The ruling Communist Party is meeting this week in Beijing, and the focus so far has been on Xi Jinping’s anti-graft fight.

China Oilfield Services, China Petroleum & Chemical Corp. and PetroChina fell at least 1.2 percent. Oil futures declined as much as 1.5 percent in New York after closing below $50 a barrel Tuesday for the first time in more than a week.

Belle International Holdings Ltd. extended a two-day drop to 13 percent as UBS Group AG said the inventory of the retailer of women’s footwear is at an “alarming level.”

Great Wall Motor, China’s biggest maker of SUVs, fell the most since Jan. 29. The stock had its ratings downgraded at JPMorgan Chase & Co. and Nomura Holdings Inc. even after the automaker posted a 53 percent increase in third-quarter earnings. Nomura cited narrowing gross profit margins and disappointing sales volumes of SUVs.

In mainland trading, coal stocks provided the biggest drag on the market with an index of energy firms falling 1.2 percent for the biggest decline among industry groups. Shaanxi Coal Industry Co. retreated 2.9 percent after jumping 20 percent over the past two days. China Coal Energy Co. slid 2.8 percent, snapping a two-day, 18 percent gain.

--With assistance from Justina Lee and Fox Hu To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net. To contact the editors responsible for this story: Robin Ganguly at rganguly1@bloomberg.net, Philip Glamann

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