China Stocks Drop to 13-Month Low on U.S. Jobs, Chinese Banks' Share Sales
China’s stocks fell to a 13-month low as Chinese banks’ share sales, slower-than-estimated U.S. jobs growth and a worsening government debt crisis in Europe fueled concern the global economic recovery will slow.
Bank of Communications Co. paced declines for lenders, losing 3.3 percent after it cut the size of its rights offer and Agricultural Bank of China Ltd. said it will sell a 15 percent stake. Aluminum Corp. of China Ltd. and Jiangxi Copper Co. slid at least 1 percent after metal prices dropped. China Vanke Co. led developers lower after May sales fell 20 percent.
Investors are worried that “global economy is going to decelerate as fiscal stimulus wears off,” said Ivan Leung, Hong Kong-based chief investment strategist at JPMorgan Private Bank. “It may not be time to add risk.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, retreated 1.6 percent to 2,511.73, the lowest close since April 30, 2009. The index has fallen 23 percent this year on concern growth will slow as the housing market cools and Europe’s debt crisis threatens China’s exports. The CSI 300 Index slipped 1.8 percent today.
Bank of Communications, China’s fourth-largest publicly traded bank, expects to raise 33.07 billion yuan ($4.8 billion) in a rights issue starting this month, about 20 percent less than originally announced.
Agricultural Bank of China, the nation’s biggest lender by customers, plans to sell 22.235 billion shares in Shanghai and 25.411 billion shares in Hong Kong, excluding an over-allotment option, according to a document posted on the securities regulator’s website. The lender will likely raise no more than $22 billion, Haitong Securities Co. estimated, less than the $30 billion local media had reported.
Chinese banks have announced plans to raise at least 300 billion yuan by selling shares and bonds to meet tougher financial guidelines after an unprecedented 9.59 trillion yuan of new loans last year weakened their capital.
Bank of Communications fell 3.3 percent to 6.18 yuan. Industrial & Commercial Bank of China Ltd., the nation’s largest lender, dropped 2.4 percent to 4.12 yuan. China Merchants Bank Co. lost 2.9 percent to 12.80 yuan.
“China banks’ massive fund-raising plans are another overhang weighing down the market, so I would say the worst is yet to come for them,” said Lan Wang Simond, who helps manage $5 billion at Geneva-based Pictet & Cie Banquiers.
The Chinese government may announce more measures to cool the housing market related to taxes and regulations, Wensheng Peng and Jian Chang, Hong Kong-based analysts, wrote in a note to clients. They forecast China’s property prices may drop between 20 percent and 30 percent in the “next few quarters.”
China Vanke said its May sales fell 20 percent from a year ago to 5.1 billion yuan, according to a statement to the Shenzhen exchange yesterday. Sales between January and May were 28 billion yuan, it said. It has acquired 8 new property projects since the April report, it said.
Vanke fell 2.2 percent to 7.12 yuan. Poly Real Estate Group Co. and Wolong Real Estate Group Co. both dropped more than 2 percent. A measure of Shanghai-traded property developers slid 1.6 percent for the biggest decline in a week.
China said it will account for the home ownership of each family, not each person, when classifying second-home purchases, according to a June 4 statement by the Ministry of Housing and Urban-Rural Development on its web site.
In the U.S., private-sector employers added 41,000 jobs to their payrolls in May, down from 218,000 in April, according to Labor Department statistics. That’s below the 180,000 median forecast by 35 economists in a Bloomberg News survey.
The jobs data “call into question how strong things were looking at the start of the year,” Ethan Harris, head of North America economics at BofA Merrill Lynch Global Research in New York, said in a June 4 interview on Bloomberg Television’s “InBusiness With Margaret Brennan.”
Hungary’s government reversed course over the weekend, saying there was no danger of default after it spent two days telling the world the nation was at risk of a Greece-like crisis. Hungary’s deficit will widen to 4.1 percent of GDP this year, compared with an average of 7.2 percent in the EU and 9.3 percent in Greece, according to European Commission estimates.
“In a globalized world, there’s nowhere to hide when sentiment turns,” said Leung. “There’s no decoupling. Everything’s connected. China’s economy remains vulnerable.”
Aluminum Corp. declined 1.4 percent to 10.08 yuan. Jiangxi Copper, the nation’s biggest producer of the industrial metal, slumped 3.2 percent to 27.50 yuan. PetroChina Co. dropped 2.1 percent to 10.39 yuan, the biggest drag on the index.
Crude oil for July delivery fell 1.7 percent to $70.27 a barrel in electronic trading in New York. The London Metal Exchange Index of six metals including copper and zinc slid 4.2 percent on June 4 to the lowest since October 5.
“Investors should continue to sell investment-led sectors, particularly cement and non-ferrous producers” as increases in labor costs will curb capital spending in those industries, according to BofA Merrill Lynch strategist David Cui in a report distributed today.
Chinese stocks are poised for additional losses this week as the benchmark index continues to ride a wave of declines that started at the end of May, according to DMG & Partners Securities Pte.
The Shanghai Composite may find initial support at 2,481, the end of its third wave, while the next support level is 2,364, representing a 100 percent extension from the first wave, analyst James Lim wrote in a report today.
The following stocks also rose or fell in China trading. Stock symbols are in parentheses after company names:
Shenzhen Capchem Technology Co. (300037 CH), a chemicals producer, rose 7.1 percent to 51.05 yuan, the highest since its January initial share sale. Huarong Securities Co. recommended buying the stock, saying the company will maintain rapid growth.
China Railway Group Ltd. (601390 CH), a rail construction company, gained 1.4 percent to 4.52 yuan, after Xinhua News Agency reported the country will spend 700 billion yuan constructing high-speed railroads across the nation this year.
Sichuan Hongda Chemical Co. (600331 CH), a zinc ingot producer, fell 10 percent to 12.25 yuan as it resumed trading for the first time since May 19. The company said its parent ended plans to restructure the listed company’s assets.
To contact Bloomberg News staff for this story: Chua Kong Ho in Shanghai at +86-21-6104-7011 or firstname.lastname@example.org
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