China's Stocks Fall to Two-Week Low on Concern About Japan Radiation Leak
March 3 (Bloomberg) -- Nick Timberlake, global head of emerging-market equities at HSBC Global Asset Management (UK) Ltd., talks about Asian stocks. Timberlake also discusses oil and global economy. He speaks from Singapore with Linzie Janis on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
China’s stocks fell, driving the benchmark index to its lowest in more than two weeks, after the risk of radiation leaks in Japan escalated and concern grew that last week’s quake will slow Asia’s economic growth.
Dongfang Electric Corp., which makes nuclear power-related products, fell 5.2 percent after Japan’s Prime Minister Naoto Kan said the danger of further radiation leaks was rising at a nuclear facility north of Tokyo. Yanzhou Coal Mining Co. led declines among coal producers on concern Japan’s demand for the fuel will decline. Ping An Insurance (Group) Co., the nation’s second-biggest life insurer, slid 2.8 percent after selling shares to a Hong Kong billionaire to boost capital.
“Investors are worried about the situation in Japan as the blast at the nuclear plant makes it a regional risk,” said Zhou Xi, a strategist at Bohai Securities Co. “It’s not about the earthquake but more about radiation leakage concerns which will drag down the economy in Japan and even the whole of Asia.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 41.37 points, or 1.4 percent, to 2,896.26 at the 3 p.m. close, the lowest since Feb. 25. The CSI 300 Index (SHSZ300) slid 1.8 percent to 3,203.96, with all 10 industry groups falling more than 1 percent.
Japan’s shares plunged for a second day, with the Topix index suffering its worst two-day loss since the 1987 stock market crash, as the country continued to reel from the March 11 earthquake. Blasts have occurred at three of the station’s six reactors since March 12 and a fire was discovered in a fourth unit’s building today.
Investors sought the relative safety of government debt as Treasuries surged to become the world’s best-performing bonds over the past week after the temblor.
Nuclear Plans
Dongfang Electric plunged 5.2 percent to 30.20 yuan. China First Heavy Industries Co., a manufacturer of nuclear power generators, slid 6.3 percent to 6.08 yuan.
China, the world’s biggest polluter, is building more nuclear reactors than any other nation in an effort to cut emissions and protect its environment while trying to maintain economic growth. The country is tripling the number of reactors, building 27 units to add to the 13 that are already operational, according to the London-based World Nuclear Association.
“China will become more cautious while developing nuclear- power plants but is unlikely to alter its long-term nuclear development plans,” Dave Dai, a Hong Kong-based analyst at Daiwa Securities Capital Markets Co., said by phone March 13. “The accident in Japan may trigger increased public concerns over building atomic plants.”
Energy Producers
Crude oil fell in New York as concerns that damage from Japan’s earthquake will limit crude demand outweighed heightening tensions in the Middle East. Prices plunged as much as 2.5 percent as factory plants remained shut in Japan.
PetroChina Co., the nation’s biggest oil company, fell 1.3 percent to 11.54 yuan. Yanzhou Coal slumped 5.1 percent to 30.02 yuan. China Shenhua Energy Co., the nation’s biggest coal producer, lost 2.7 percent to 26.69 yuan.
Japan relies on imports for almost all of its coal consumption, according to China Merchants Securities Co. The Asian country imports about 180 million tons of coal every year, accounting for about 20 percent of the global trade of the fuel, Lu Ping and Wang Peipei, analysts at China Merchants wrote in a report dated yesterday.
A one-percentage-point growth slowdown in Japan’s economy is expected to cut China’s overall exports by 0.2 percentage point, Shenyin & Wanguo Securities Co. analysts led by Ling Peng wrote in a report yesterday. About 8 percent of China’s exports go to Japan and 12 percent of China’s imports are from Japan, according to Bank of America-Merrill Lynch.
China Cosco Holdings Co., Asia’s largest shipping line by market value, dropped 3 percent to 10.16 yuan. China Southern Airlines Co., the nation’s biggest airline, lost 2.5 percent to 8.22 yuan.
‘Buying Opportunities’
Japan’s earthquake creates “buying opportunities” for Chinese equities as the temblor may ease pressure on the central bank to tighten monetary policy, according to China International Capital Corp.
“The quake may bring a glimmer of hope that China’s central bank may ease the strength of its tightening monetary policies as uncertainty rises significantly overseas,” Hao Hong, global equity strategist, said in a report yesterday. “The market may become more volatile and the market corrections will provide buying opportunities.”
Overtakes Japan
China surpassed Japan as the world’s second-biggest equities market by value, as the Japanese earthquake spurs concern rebuilding efforts will curb manufacturing and add to the world’s largest public debt.
Ping An fell 2.8 percent to 49.45 yuan. The company raised HK$19.4 billion ($2.5 billion) selling shares to a Hong Kong billionaire. The share sale to Chow Tai Fook Nominee Ltd. is “less justified” than a full rights issue from the viewpoint of existing shareholders, Deutsche Bank AG said.
While the placement will “strengthen” the group’s overall solvency ratio above 200 percent even when considering the capital needs of Shenzhen Development Bank Co., “we question the strategic value in introducing Chow Tai Fook,” Bob Leung, an analyst at Deutsche Bank, wrote in a report dated yesterday.
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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