China Stocks Fall Most in 2 Weeks as Growth Slows; Agricultural Bank Gains

China’s stocks dropped, with the benchmark index falling the most in two weeks, after the nation’s economic growth moderated. Agricultural Bank of China Ltd. rose on the first day of trading.

Jiangxi Copper Co. and Anhui Conch Cement Co. declined at least 1.4 percent after second-quarter growth slowed to 10.3 percent and industrial output rose less than expected. Zijin Mining Group Co. slid 4.2 percent after saying regulators are investigating the company’s disclosure of an acid leak. Agricultural Bank, the country’s largest by customers, gained 0.8 percent, the smallest debut gain among the nine lenders that have sold shares Shanghai in the past four years.

“The risk of a sharper slowdown is inevitable unless the government reverses tightening measures,” said Zheng Tuo, president of Shanghai Good Hope Equity Investment Management Co. “The valuation of Agricultural Bank isn’t that attractive.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 46.14, or 1.9 percent, to close at 2,424.30, the most since June 29. The gauge has slumped 26 percent in 2010, Asia’s worst performer, as the government stepped up measures to curb inflation and property speculation. The CSI 300 Index slipped 1.7 percent to 2,608.52, with all 10 industry groups retreating.

The Shanghai Composite initially erased declines to gain 1 percent after the data was released at 10 a.m. local time, before losing ground.

Economic growth of 10.3 percent was less than the median 10.5 percent estimate in a Bloomberg News survey of 28 economists and eased from an 11.9 percent gain in January-March, statistics bureau data showed.

Industrial Output

Industrial output rose 13.7 percent, compared with analysts’ forecasts of 15.1 percent. That was the weakest since September excluding January and February numbers distorted by a Lunar New Year holiday.

Jiangxi Copper, China’s biggest producer of the metal, lost 1.4 percent to 24.93 yuan. Anhui Conch, the nation’s biggest cement maker, slid 1.6 percent to 16.72 yuan. China First Heavy Industries Co., a maker of equipment used in the mining and energy industries, retreated 3.2 percent to 5.10 yuan.

China’s economy is slowing faster than anticipated, with retail sales, industrial production and fixed-asset investment growth weaker than forecast, according to Mark Williams, senior China economist at Capital Economics.

“Concerns about overheating - which we never thought justified - have rapidly given way to worries that the economy is headed for a hard landing,” London-based Williams said in a report today.

Investment, Retail

Urban fixed-asset investment gained 25.5 percent in the first six months of 2010 from a year earlier, the statistics bureau said in today’s statement. The pace compares with a 33.6 percent increase in the first half of 2009, when a 4 trillion yuan fiscal stimulus program was kicking in. Retail sales rose 18.3 percent in June from a year earlier, the bureau said.

Agricultural Bank’s first-day gain contrasted with losses for other lenders. The bank sold shares in China at 2.68 yuan each as part of an initial public offering that valued the company at $126 billion. The stock rose 0.8 percent to 2.70.

Bank of China Ltd. slid 2.3 percent to 3.45 yuan. Industrial & Commercial Bank of China Ltd. retreated 1.7 percent to 4.18 yuan.

Chinese bank lending in the first half was 28 percent higher than official numbers suggest as more loans were repackaged into investment products, “distorting” credit data, Fitch Ratings said yesterday.

Sinopec, PetroChina

Refiners fell after domestic crude-oil processing increased the least in eight months.

China Petroleum & Chemical Corp., Asia’s biggest oil refiner that’s also known as Sinopec, dropped 2.1 percent to 7.95 yuan. PetroChina Co., the nation’s biggest oil company, lost 1.3 percent to 10.28 yuan.

Crude processing climbed 11 percent from a year earlier, according to China Mainland Marketing Research Co. That’s the slowest pace of growth since the 10 percent increase in October last year, according to the research company, which compiles data for the government.

A slowdown in China’s economy will test the government’s resolve to deflate a real-estate bubble, according to Stone & McCarthy Research Associates’ Tom Orlik. China is unlikely to raise interest rates this year and the government may consider “less rigid” application of loan quotas in the second half if there is a rapid slowdown in growth, he said in an e-mail.

Inflation cooled to 2.9 percent in June, reported in Beijing today. Analysts’ forecasts indicated June inflation of 3.3 percent. In May, consumer prices rose 3.1 percent, the fastest pace in 19 months.

Bull Market

Anthony Bolton, Fidelity International’s president for investment, said conditions are in place for the resumption of a bull market in Chinese A shares.

“We’ve had a bear market for a year,” Bolton said at a press briefing in Hong Kong. “Valuations are now very attractive on certain companies. We’ve got all the background for a new phase of bull market.”

Zijin Mining, China’s largest gold producer, lost 4.2 percent to 5.52 yuan. The company said the China Securities Regulatory Commission will investigate its release of information about a leak of waste water from a mine in Fujian province that polluted a local river.

Citic Guoan Information Industry Co. slumped 7.7 percent to 10.40 yuan, the biggest drop since June 29. The company said first-half net income probably dropped and it may not post a profit for the period.

--Zhang Shidong. Editors: Richard Frost, Linus Chua

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.