China ADR stock research

June 25 (Bloomberg) -- Most China stocks fell on speculation this year’s rally has outstripped the prospects for earnings growth with the benchmark Shanghai Composite Index trading at the most expensive relative to earnings in 15 months.

Jiangxi Copper Co., the country’s biggest producer of the metal, slid 1.7 percent after more than doubling this year and Aluminum Corp of China Ltd. dropped 2.4 percent. China Pacific Insurance (Group) Co. rallied 6.4 percent after the Shanghai Securities News said the company may list shares publicly in Hong Kong next year.

“Shares have risen to an expensive level and everyone is expecting a correction to take place soon,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “That’s why buying has become more and more cautious.”

About five stocks fell for every three that rose on the Shanghai Composite, which added 2.75, or 0.1 percent, to 2,925.05 at the close, its highest since June 2008. The measure has surged 61 percent this year, the world’s third-best performer, as investors bet the government’s 4 trillion yuan ($585 billion) stimulus plan will revive the economy. Shares on the index trade at 29 times earnings, the most expensive since March 2008, weekly data compiled by Bloomberg show.

The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, lost 0.1 percent to 3,117.92.

Jiangxi Copper dropped 1.7 percent to 31.85 yuan. Tongling Nonferrous Metals Group Co., China’s second-biggest copper producer, retreated 1.8 percent to 19.62 yuan after almost doubling in 2009. Aluminum Corp. of China, the nation’s biggest maker of the lightweight metal and also called Chalco, lost 2.4 percent to 12.07 yuan.

Industry Gainers

An index of materials stocks has risen 82 percent this year, the second-biggest gain among the CSI 300’s 10 industry groups. Financial shares have rallied the most, jumping 90 percent.

Haitong Securities Co., the country’s second-largest listed brokerage by market value, lost 1.5 percent to 16.23 yuan after China Minsheng Banking Corp. said it sold its stake in the company at a 13 percent discount to yesterday’s closing price. Minsheng Banking, the nation’s first privately owned bank, rose 0.6 percent to 7.99 yuan.

Pacific Insurance, the nation’s third-largest insurer, climbed 6.4 percent to 21.38 yuan, the biggest gain since March 31. Preparations for the listing have started and the board may meet in August to approve the plan, the Shanghai Securities News reported today, citing an unidentified person familiar with the plans. Calls to Wang Lei and Zhang Yanyan in the company’s investor relations department weren’t answered.

Sinopec Acquisition

China Petroleum & Chemical Corp., Asia’s biggest oil refiner, also known as Sinopec, climbed as much as 2.5 percent in morning trade after its parent agreed to buy Geneva-based Addax Petroleum Corp. for C$8.3 billion ($7.3 billion) in the nation’s biggest overseas takeover to date. The stock closed 0.4 percent higher at 10.56 yuan.

Shanghai AJ Corp., an investment holding company that runs trust and brokerage businesses, jumped by the 10 percent daily limit to 13.19 yuan on speculation a government-backed developer will buy a stake in the company.

Shanghai Lujiazui (Group) Co., which develops land in the city’s Lujiazui financial district, may buy a stake in AJ to revamp its businesses, according to Wu Kan, a fund manager at Dazhong Insurance Co. and Zhang Qi, an analyst at Haitong Securities Co.

Calls to Lujiazui Group’s press office in Shanghai were unanswered. An assistant to AJ’s board secretary Xu Yiyang in Shanghai said he hasn’t received any notice on the matter.

Qingdao Haier Co., the air-conditioner and refrigerator unit of China’s biggest appliance maker, added 1 percent to 13.83 yuan. The company said its parent bought 13.9 million additional shares, or 1.04 percent of the company, since May 21.

Tangshan Jidong Cement Co., a Chinese producer of the construction material, climbed 3.5 percent to 13.89 yuan, the biggest gain since June 1, after saying it will build two new production lines with a daily capacity of 4,500 tons.

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