Shanghai Stocks Decline as U.S. Income Data Fuels Economic Growth Concern
China’s stocks fell, with the benchmark index dropping for the first time in four days, as smaller-than-estimated growth in personal incomes in the U.S. heightened concern the economic recovery may falter.
China Cosco Holdings Co. and China Shipping Development Co. slid at least 1.1 percent on concern a slowing economy will reduce transport demand. China Vanke Co. and Poly Real Estate Group Co. paced declines for property developers on speculation the government will boost housing supply to curb price increases.
“Weak external demand is a big factor that will hamper China’s economic growth the rest of year,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “It’s negative for stocks as the government is struggling now to bolster domestic demand. It’ll add uncertainty to the complicated economic scenario.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slipped 13.87, or 0.5 percent, to 2,638.80 at the 3 p.m. close. It added less than 0.1 percent this month after gaining 10 percent in July. The CSI 300 Index fell 0.4 percent to 2,903.19 today.
The Shanghai gauge has rebounded 12 percent from this year’s low on July 5 as investors speculated the government would ease monetary policy. That’s pared this year’s loss to 19 percent, after the government increased down-payment requirements on home sales and ordered banks to set aside more deposits as reserves.
Shippers Drop
In the U.S., the Standard & Poor’s 500 Index lost 1.5 percent yesterday after government data showed personal incomes climbed 0.2 percent in July, less than the 0.3 percent projected in a Bloomberg survey of economists. Disposable incomes, or the money left over after taxes, dropped for the first time since January after adjusting for inflation. The U.S., the world’s biggest economy, makes up about 20 percent of China’s exports.
China Cosco, the world’s largest operator of dry-bulk ships, fell 1.1 percent to 9.91 yuan. China Shipping, a unit of China’s second-biggest sea-cargo group, lost 1.2 percent to 9.56 yuan.
A gauge of property stocks in the Shanghai Composite fell 0.4 percent. Vanke, the nation’s biggest listed property developer, lost 0.7 percent to 8.42 yuan. Poly Real Estate, the second largest, dropped 0.9 percent to 12 yuan.
The country’s property stocks are likely to lag the broader market as the government increases the supply of housing to curb price increases, Shi Bo, general manager of Shanghai Elegant, said in a phone interview today. Harsher measures may be imposed if housing prices don’t decline, he said.
Range Bound
The Shanghai Composite is little changed this month after jumping 10 percent in July. Consumer staple stocks are the best performers in August on the prospect accelerating inflation will boost profit and as the government encourages domestic consumption to reduce the nation’s reliance on exports and investment. Financial stocks are the laggards on concern banks’ new share sales will divert funds from existing equities.
Industrial & Commercial Bank of China Ltd., the biggest listed lender which will issue 25 billion yuan ($3.67 billion) of six-year convertible bonds, slid 1 percent to 4.08 yuan, adding to a 5.3 percent loss for the month. China Construction Bank Corp., the second largest, lost 0.6 percent to 4.68 yuan.
China’s stock market may be “range bound” in the next couple of months as concerns about policy tightening will be offset by positive factors including new investment programs and the 12th five-year plan, UBS AG said.
“Our baseline scenario is for a soft landing in GDP growth and moderate inflation,” said Wang Tao, UBS’s China economist, who expects the nation’s inflation rate to stay above 3.5 percent in the coming months, while investment and industrial production will decelerate.
Earnings Outlook
The worst of China’s economic slowdown may be over as the government speeds up project approvals and construction of low- income housing, said Mo Qian, an analyst at Essence Securities Co. in a report today.
Data tomorrow may show China’s manufacturing expanded at a faster pace in August. The Purchasing Managers’ Index, compiled by the Federation of Logistics and Purchasing, probably rose to 51.5 in August from 51.2 a month earlier, according to a survey by Bloomberg News. The figure is due 9 a.m. tomorrow.
Citigroup Inc. analysts Grace Lam and Minggao Shen said that China’s first-half earnings have been “generally solid” though there have been “divergences” with some industries such as telecom equipment and utilities reporting the lowest profit growth.
China’s airlines, fertilizer companies and telecom equipment makers are the industries most likely to see earnings improvement in the second half, they said in a report to clients.
Yunnan Copper Industry Co., China’s fourth-biggest producer of the metal, added 3.9 percent to 20.96 yuan. The company said it plans to raise 5.45 billion yuan via the private placement of as many as 300 million shares. The stock resumed trading today after a suspension over the past three days.
--Zhang Shidong. Editor: Allen Wan, Richard Frost
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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