2014 Top Stocks Market, Best Stocks Investment In 2014, Top Stocks For 2014: China¡¯s Stocks Slide to Lowest Since March 2009 as Small Companies Plunge

China��s stocks (IFB1) fell to the lowestlevel since March 2009 on concern the European debt crisis willcurb exports and a potential cash crunch before the Chinese newyear holidays may boost lending costs for small companies.

China Cosco Holdings Co. (601919), Asia��s largest shipping line,dropped 4.4 percent after Luxembourg��s prime minister said theEuropean Union is facing a recession of unknown scope. UfidaSoftware Co. plunged 8 percent, leading declines for technologystocks, the worst performing industry. Shanghai PudongDevelopment Bank Co. (600000) paced gains for lenders after the centralbank refrained from selling three-month bills and investorsspeculated the central bank will cut lenders�� reserverequirements this month.

��Small-cap shares are falling as they had risenconsiderably before; it��s a rotational change,�� said Wu Kan, afund manager at Dazhong Insurance Co., which oversees $285million. ��Investors are probably keen on steadier shares likebig-cap companies amid the economic downturn.��

The Shanghai Composite Index (SHCOMP), which tracks the bigger ofChina��s stock exchanges, slid 20.94 points, or 1 percent, to2,148.45 at the close. The CSI 300 Index slumped 1 percent to2,276.39.

The Shenzhen Composite lost 3.5 percent, while the ChiNextindex of start-up companies plunged 5.7 percent. Anhui AnkeBiotechonology (Group) Co. tumbled 9.5 percent to 9.99 yuan inShenzhen. Gauges of technology and health-care companies in theCSI 300 dropped more than 3 percent, the most among industrygroups. Ufida Software fell 2.5 percent to 16.48 yuan. BeijingTongrentang Co., a retailer of Chinese medicine, declined 5.1percent to 13.14 yuan.

The Shenzhen Stock Exchange will oversee the initial reviewof refinancing plans of ChiNext companies, Caixin Onlinereported today, cited unidentified officials as saying.

Shippers Decline

Speculation the securities regulators are ��looking todecentralize oversight on financing plans may have had apsychological impact o! n invest ors,�� said Wu. ��If the Shenzhenexchange were to be in charge of refinancing for GEM-listedstocks, there would be less certainty.��

China Cosco lost 4.4 percent to 4.30 yuan. UniCredit SpA,Italy��s largest bank, said yesterday it will sell new shares ina 7.5 billion-euro ($9.8 billion) offer to strengthen itscapital position. The rights offer boosted concern that lendersmay struggle to raise more capital to weather the region��s debtcrisis. The European Central Bank reported overnight depositsfrom financial institutions rose to an all-time high.

The Shanghai Composite fell 1.4 percent on the firsttrading day of the year yesterday, adding to a 22 percent plungelast year, on concern increases in borrowing costs and Europe��sdebt crisis will derail economic growth. The CSI 300 (SHSZ300) slid 25percent in 2011. The value of stocks traded in Shanghai slumpedto the weakest level in three years on Dec. 29.

Money Rates

The People��s Bank of China refrained from selling three-month bills for a second week today, helping stem increases inmoney-market rates as banks hoard cash in the run-up to theChinese New Year holiday.

China��s seven-day repurchase rate, which measures interbankfunding availability, rose 51 basis points to 4.51 percent inShanghai, based on a daily fixing by the National InterbankFunding Center. It reached a five-month high of 5.60 percent onDec. 30 before sliding 1.60 percentage points yesterday afterPremier Wen Jiabao said business conditions may be ��relativelydifficult�� this quarter and monetary policy will be fine-tunedas needed.

Staples Drop

Consumer-staples producers in the CSI 300 slid for a secondday, losing 1.6 percent. The stocks were the best performer lastyear out of the index��s 10 groups as investors bought shares ofcompanies whose earnings can better withstand an economicslowdown. The gauge of consumer staples trades at 16.8 timesestimated earnings, compared with 8.9 times for the CSI 300,according to data compiled by Bloombe! rg.

Kweichow Moutai Co., the biggest maker of baijiu liquor,fell 1.1 percent to 183.15 yuan, adding to yesterday��s 4.2percent plunge.

��Chinese alcohol companies, one of the biggest winnerslast year, have relatively high valuations now,�� said Zhang Lu,a Shanghai-based analyst at Capital Securities Corp. ��Investorsare taking profits.��

A gauge of financial companies (SHSZ300) in the CSI 300 rose 0.6percent today, the only gainer among the industry groups.

Banks Gain

Pudong Development Bank gained 2.9 percent to 8.65 yuan.The lender estimated last year��s net income jumped 42 percent to27.2 billion yuan ($4.3 billion). China Citic Bank Corp. surged2.8 percent to 4.10 yuan. China Construction Bank Corp. (601939), thesecond-largest lender, increased 1.8 percent to 4.58 yuan.

Economists at Barclays Capital and Bank of America Corp.say the central bank will cut lenders�� reserve requirementsbefore the Chinese New Year holiday starts on Jan. 23, thesecond reduction since 2008. The People��s Bank of China raisedreserve requirements six times last year to cool inflation thataccelerated to its fastest pace in three years in July.

��I think investors will gain more confidence in theinterest-sensitive sector�� if borrowing costs and reserveratios are cut, while liquidity improves, Hugh Simon, chiefexecutive officer of Hamon Investment Group, said on BloombergTelevision today from Hong Kong. He said he was buying Chinesebank shares.

Local Debt

Concerns over the quality of Chinese banks�� assets, the��major share-price driver�� of lenders�� stocks last year, willease, according to Macquarie Group Ltd.

��We believe the macro economy will undergo a soft landingand there will be further monetary loosening in 2012,�� VictorWang and Rachel Li, Hong Kong-based analysts at Macquarie, wrotein a report dated yesterday. ��We thus expect asset qualityconcerns to ease going forward.��

China��s audit office said local governments have cleared upalmost half! the 531 billion yuan ($84 billion) of debt on theirbooks that an investigation found to have irregularities. Thegovernments and companies they set up to borrow money haveresolved 259 billion yuan of bad debt with measures includingland sales and the offer of new collateral, according to datareleased yesterday on the National Audit Office��s website.

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