China’s Stocks Fall Most in Three Weeks on Slowing Exports, Europe Crisis

China’s stocks fell, sending the benchmark index down the most in three weeks, as exports grew at the slowest pace in almost two years and surging Italian bond yields boosted concern Europe’s debt crisis is worsening.

Anhui Conch Cement Co. led material stocks lower as export growth slowed to 15.9 percent in October from 17.1 percent the previous month. Industrial & Commercial Bank of China (601398) Ltd. dropped 2.8 percent after people familiar with the matter said Goldman Sachs Group Inc. raised $1.1 billion selling shares of China’s largest bank. Poly Real Estate Group Ltd. paced declines by property companies after the 21st Century Business Herald said developers’ debt-asset ratio hit an 11-year high.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 45.38 points, or 1.8 percent, to 2,479.54 at the close. The gauge rose 0.8 percent yesterday after government data showed inflation cooled. The CSI 300 Index (SHSZ300) retreated 1.9 percent to 2,699.59 today.

“Investors are concerned Europe’s crisis may affect China in the short-term, especially because we export to that region,” said Wei Wei, an analyst at West China Securities Co. “Although inflation eased yesterday, there are expectations it will take a while before any easing of policy takes place.”

The Shanghai Composite has fallen 12 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation that’s near a three-year high. The index is valued at 11.6 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

A gauge of material producers slid 2.3 percent, the most among the 10 industry groups in the CSI 300. Anhui Conch, the biggest cement producer, retreated 4.3 percent to 18.70 yuan. Jiangxi Copper Co. fell 3.1 percent to 27.44 yuan.

Exports Slow

China’s export growth of 15.9 percent last month was less than the 16.1 percent median estimate in a Bloomberg economist survey, according to a government report today. Imports climbed 28.7 percent, leaving a trade surplus of $17 billion, the customs bureau said on its website.

“The weakness in exports is consistent with the external slowdown and we expect further declines in the growth rate,” said Ken Peng, a senior economist with BNP Paribas SA in Beijing. “Domestic demand growth is weakening so the strength in imports is likely temporary and we may get a sharp downturn next month.”

The MSCI Asia Pacific Index dropped 3.5 percent today. Italy will sell treasury bills today after yields on 10-year notes surged to 7.25 percent yesterday, a euro-era record. That’s higher than the 7 percent level at which Greece, Ireland and Portugal sought international bailouts.

European Concerns

German Chancellor Angela Merkel’s Christian Democratic Union may adopt a motion at an annual party congress next week to allow euro members to exit the currency area, a senior CDU lawmaker said.

China’s export growth may slump if the euro-area breaks up, according to Bank of America Corp. Investors should pay more attention to the increasing risk of a breakup that may cause a sudden collapse of the global financial system as in 2008, economists led by Ting Lu said in a note today. Europe instead of Wenzhou is a major risk to Chinese economy, they said. Wenzhou city’s small manufacturers have been struggling because of a cash crunch.

China’s consumer prices rose 5.5 percent from a year earlier, the least in five months, and industrial production increased 13.2 percent, the statistics bureau said on its website yesterday. Housing transactions slid 25 percent from September, the bureau’s data showed.

Inflation Outlook

The nation’s inflation isn’t moderating fast enough to justify an “immediate and meaningful” monetary easing, Credit Suisse Group AG said. “China is in a period of observation on its macro conditions, with selective easing introduced in some sectors and continued tightening in others,” Dong Tao and Christiaan Tuntono, analysts at Credit Suisse, wrote in a report dated today.

China won’t change macroeconomic policy controls this year, China Central Television reported, citing Zhou Wangjun, deputy director at the price department of the National Development and Reform Commission.

ICBC fell 2.8 percent to 4.24 yuan, the biggest loss since Sept. 22. Goldman Sachs sold 1.75 billion ICBC shares at HK$4.88, two people said, asking not to be identified as the details are private. That’s 6 percent below Beijing-based bank’s closing price in Hong Kong yesterday.

Property Stocks

Poly Real Estate dropped 2.5 percent to 9.58 yuan. China Vanke Co., the nation’s biggest listed property developer, lost 1.3 percent to 7.57 yuan.

Combined debts at Chinese developers increased by 151.4 billion yuan ($24 billion) to 1.24 trillion yuan as of end-June, bringing the average debt-asset ratio to 71.28 percent, 21st Century Business Herald said today, citing Wind Info data. The debt-asset ratio topped 80 percent at 16 listed developers as of Sept. 30, the report said.

SAIC Motor Corp., the biggest automaker, dropped 3.1 percent to 15.48 yuan. Anhui Jianghuai Automobile Group Co. fell 4.7 percent to 7.24 yuan.

Deliveries of passenger and commercial vehicles in the world’s largest automobile market declined 1.1 percent to 1.52 million in October, led by an 18 percent drop in minivan sales, the China Association of Automobile Manufacturers said yesterday.

China United Network Communications Ltd. (600050), which controls China Unicom (Hong Kong) Ltd., slipped 2.4 percent to 5.34 yuan, the lowest close since Oct. 21. China Unicom and China Telecom Corp. said they will cooperate with an anti-monopoly probe of their broadband Internet services by the nation’s top economic planning agency.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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