China's Stocks Drop For Seventh Day on Manufacturing Slowdown; Miners Fall

China’s benchmark stock index dropped for a seventh day, the longest losing streak in 18 months, as a bigger-than-expected slowdown in the country’s manufacturing last month added to evidence the economy is cooling.

Jiangxi Copper Co. and Shenhua Energy Co. paced losses by commodity producers as metal and oil prices declined. Aluminum Corp. of China Ltd., the nation’s biggest maker of the lightweight metal, slid 2.8 percent after cutting the price of alumina. Jiangsu Hengrui Medicine Co. fell among health-care companies on concern valuations are excessive.

The Shanghai Composite Index retreated 24.58, or 1 percent, to close at 2,373.79, the lowest since April 8, 2009. The seven- day decline is the longest since an eight-day slump that ended Dec. 31, 2008. The CSI 300 Index slid 1.4 percent to 2,526.07.

“The latest indicators are pointing to a slowdown in the economy,” said Zhang Ling, a fund manager at Shanghai River Fund Management Co. “The correction is far from over.”

The Shanghai Composite tumbled 23 percent last quarter, capping the biggest loss since the three months to March 2008, as policy makers tightened rules for the property market and concern grew that Europe’s austerity measures will hurt demand in China’s largest export destination. The equity index is the world’s third-worst performer this year, down 28 percent.

The government’s Purchasing Managers’ Index declined for a second month, falling to 52.1 from 53.9 in May. That was less than the median 53.2 estimate in a Bloomberg News survey of 12 economists. An HSBC Holdings Plc manufacturing index slid to a 14-month low.

‘Steady Moderation’

Zhang Liqun, a researcher for the Chinese cabinet, said the manufacturing data indicates a “steady moderation” to a more sustainable pace of growth after an 11.9 percent expansion in the first quarter.

Jiangxi Copper, the biggest producer of the metal, lost 2.6 percent to 23.44 yuan, capping a 42 percent drop this year. Shenhua, the largest coal producer, retreated 1.1 percent to 21.73 yuan. Yanzhou Coal Mining Co., the listed unit of the fourth-biggest coal miner, slipped 3.8 percent to 15.80 yuan.

Oil for August delivery fell as much as 1.9 percent to $74.21 a barrel in electronic trading in New York, a fourth day of declines. Three-month delivery copper fell as much as 1.8 percent in London today. Aluminum declined 1.6 percent and zinc lost 2 percent.

Aluminum Corp. of China, better known as Chalco, slumped 2.8 percent to 8.91 yuan, the lowest since March 2009. The company said it cut the spot price for alumina by 7 percent, the Beijing-based company said today.

Slower Demand

Economic growth is moderating, a rebound in exports is weakening, and slower domestic demand is leading to a build-up of finished-goods inventories, said the logistics federation, which released the government’s PMI. Industrial production is entering a “light season” and the output of heavy energy users such as metal and oil processers contracted last month, it said.

Investors are growing jittery about signs of a slowdown in China. A downward revision by the Conference Board on its April economic outlook for China contributed to a 4.3 percent plunge on the Shanghai Composite on June 29.

Still, Citic Securities Co. strategists led by Yu Jun said the benchmark gauge may climb above 3,000 points in the second half as slowing inflation and a decline in home prices ease investor concerns of further tightening measures.

The brokerage recommended investors buy shares of insurers, banks, property developers, agriculture producers and machinery and home-appliance makers.

A gauge tracking health-care stocks slid 3.4 percent, sending its price-earnings ratio to 22 times. The decline was the most among the 10 industry groups on the CSI 300 Index, which trades at 16.9 times reported earnings after a 29 percent loss this year.

Jiangsu Hengrui Medicine retreated 5.4 percent to 36.95 yuan. Jiangsu Yuyue Medical Equipment Co. slid 5 percent to 33.53 yuan, paring an annual rally to 57 percent.

“Investors gave a high premium to pharmaceutical stocks to reflect their defensive nature,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “As most sectors become cheaper after the decline on the broader market, investors are now considering rerating valuations of pharmaceutical stocks.”

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

Bright Oceans Inter-Telecom Corp. (600289 CH) gained 7.1 percent to 9.33 yuan, the most since March 5, after the company said International Business Machines Corp. bought 5.92 million of its shares for 50 million yuan.

Chongqing Water Group Co. (601158 CH), a Chinese water- treatment company, dropped 3.9 percent to 6.90 yuan, extending yesterday’s 10 percent slump after 225 million of its shares became tradable yesterday.

Zhejiang Yinlun Machinery Co. (002126 CH), a maker of auto parts, surged by the 10 percent daily limit to 20.05 yuan. First-half profit likely rose by between 210 percent and 260 percent from a year earlier, compared with the previous prediction for a gain of 130 percent to 180 percent, according to a company statement dated today.

--Zhang Shidong. Editors: Richard Frost, Reinie Booysen

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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