China Stocks Fall Most in 2 Weeks on Economy, Inflation Concern

China’s stocks fell, driving the benchmark index down by the most in two weeks, on concern the government’s policy tightening measures are slowing the economy without containing inflation.

Jiangxi Copper Co. led declines for material shares before a government report tomorrow that may show tightening measures curbed economic expansion. China Vanke Co. and Poly Real Estate Group Co., the biggest developers, fell more than 1.4 percent after Moody’s Investors Service cut its outlook for the property industry. Shanghai Electric Power Co. slid the most this month after the government said power consumption growth slowed.

“Investors are concerned about further tightening measures,” said Tu Jun, a strategist at Shanghai Securities Co. “Uncertainty always peaks before economic data releases.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 7.8 points, or 0.3 percent, to 3,042.64 at the 3 p.m. close. The CSI 300 Index (SHSZ300) slid 0.6 percent to 3,353.56.

The Shanghai Composite has surged 8.4 percent this year, the best performer among the biggest Asian markets, as optimism about growth in the world’s second-largest economy and corporate earnings outweighed measures to cool inflation that reached a 28-month high in November. The central bank has raised the reserve-requirement ratio nine times since the start of 2010 and borrowing costs four times.

The government will report tomorrow that gross domestic product rose 9.4 percent from a year earlier, according to the median estimate in a Bloomberg News survey of 25 economists, down from last year’s peak rate of 11.9 percent.

Inflation Outlook

The survey also showed inflation accelerated to 5.2 percent in March, exceeding the government’s 2011 target of 4 percent for the third month this year. That compared with 4.9 percent in January and February.

Inflation in March may have risen 5.3 percent to 5.4 percent from a year earlier, Hong Kong-based Phoenix Television reported on its website today, citing an unidentified person.

Reports from the People’s Bank of China today showed new loans were 679.4 billion yuan ($104 billion) in March and M2 money supply rose 16.6 percent from a year earlier. The increase in loans compared with the 600 billion yuan median forecast in a survey of economists. M2 compared with a median estimate of 15.4 percent.

‘Really Slowing’

China Vanke declined 1.5 percent to 8.80 yuan. Poly Real Estate lost 2.3 percent to 13.83 yuan. The 21st Century Business Herald said Shenzhen may fix price caps on new homes without presale permits and may stop presale of luxury homes, citing an unidentified real estate developer.

Moody’s today lowered its outlook for China’s property sector to “negative” from “stable” on concern residential sales could decline by as much as 30 percent as local government enforce housing curbs.

The nation’s economy is “really slowing” though there won’t be a big growth slump, said Ba Shusong, a government researcher.

China may fine-tune its tightening policies by slowing the pace of the moves, Ba, deputy director-general of the State Council’s Development Research Center, said at a conference in the eastern city of Hangzhou today.

Jiangxi Copper, the biggest copper producer in China, lost 1 percent to 39.58 yuan. Anhui Conch Cement Co., the largest cement company, slid 3.5 percent to 40.15 yuan.

Goldman Sachs Group Inc lowered its year-end copper forecast by 11 percent on concern that weak Chinese demand and the deadly earthquake in Japan will delay an expected reduction in exchange stockpiles. Stockpiles monitored by the London Metal Exchange, the Shanghai Futures Exchange and the Comex in New York have gained 29 percent since last year’s low on Dec. 10, according to data compiled by Bloomberg.

Power Demand

Shanghai Electric slipped 1.2 percent to 5.02 yuan. China’s March power consumption growth slowed from February as the government took steps to prevent the economy from overheating.

Electricity demand rose 13 percent last month from a year earlier to 388.8 billion kilowatt-hours, the National Energy Administration said in a statement on its website today. That compares with February’s 16 percent increase.

To contact the editor responsible for this story: Reinie Booysen at rbooysen@bloomberg.net

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