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China stocks slide to two-week low as Kweichow Moutai’s disappointing earnings set bearish tone

  • Kweichow Moutai leads decline in liquor makers after reporting weaker-than-consensus third-quarter earnings; rival Wuliangye Yibin slips in tandem
  • Hangzhou Hikvision’s results beat expectations, providing support for security-related stocks

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People cross the street beneath a jumbo screen showing the latest stock and currency exchange data in Shanghai on October 8, 2020. Photo: EPA-EFE
China stocks fell to a two-week low as liquor juggernaut Kweichow Moutai’s lacklustre third-quarter earnings weighed on consumer stocks while top cadres of the Communist Party gather in Beijing for a key once-every-five-years policy-setting event.
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The Shanghai Composite Index fell 0.8 per cent to 3,251.12 at the close of trading, after tumbling as much as 1.6 per cent. The CSI 300 Index, which tracks the biggest companies listed in Shanghai and Shenzhen, dipped 0.6 per cent. The Shenzhen Component Index rose 0.7 per cent, lit up by the likes of video surveillance giant Hikvision, whose results beat forecasts.

Stock indices in Australia and Japan retreated marginally, while Hong Kong’s financial markets were closed for a public holiday.

The decline in Shanghai came after the local benchmark index completed two straight weeks of losses. China’s onshore market has been struggling for catalysts to break out of its rangebound trading over the past three months since a surge from March swiftly lifted the index to a two-year high in July.

“Investors are taking profit from blue-chip stocks that have rallied a lot this year, such as consumer companies, and switching into sectors with lower valuations,” said Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management. “This kind of rotation typically happens towards the year-end and should be a temporary [weakness].”

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Liquor distillers plunged, setting the tone for the broader market. Kweichow Moutai disappointed investors after posting a 7 per cent gain net profit to 11.2 billion yuan (US$1.7 billion) from a year earlier. It trailed the 11.8 billion yuan consensus forecast, according to S&P Global Market Intelligence. Growth was 13 per cent in the first half of 2020.

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