China’s stocks fell, sending the benchmark index to its lowest level in six weeks, on concern a property slowdown will hurt growth and after Standard & Poor’s put 15 European nations on watch for lower ratings.
Industrial & Commercial Bank of China Ltd. (601398) and Bank of China Ltd. dropped at least 1 percent after Fitch Ratings said a property-price correction will lead to worsening loan portfolios. Tongling Nonferrous Metals Group Co. fell among commodity producers after Nomura Holdings Inc. cut its estimate for China’s growth next year. Zhejiang Bangjie Digital Knitting Share Co. slid 2.9 percent, pacing declines by companies reliant on European demand, on concern orders will slow.
“The weakness in the property market will pose a big threat to economic growth next year,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “There is a lot of uncertainty in Europe. If the debt crisis worsens, hot money will probably continue to flow out of China.”
The Shanghai Composite Index (SHCOMP) dropped 0.3 percent to 2,325.91 at the close, the lowest since Oct. 21. The CSI 300 Index (SHSZ300) fell 0.2 percent to 2,516.34. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.9 percent in New York yesterday.
The Shanghai gauge has plunged 17 percent this year, exceeding last year’s 14 percent decline, after the central bank raised interest rates and lenders’ reserve-requirement ratios to curb inflation. The index is valued at 11.1 times estimated earnings, compared with a six-year average of 18.3 times, according to weekly data compiled by Bloomberg.
A move by the central bank to lower required reserves for banks for the first time since 2008 failed to boost stocks, with the Shanghai Composite sliding 0.3 percent since the decision was announced on Nov. 30. Premier Wen Jiabao has pledged to “fine-tune” economic policies to sustain growth amid a deepening debt crisis in Europe that threatens to trigger a global recession.
The statistics bureau is scheduled to report November’s inflation rate and other economic figures on Dec. 9. Consumer prices probably increased 4.5 percent last month from a year ago, compared with a 5.5 percent rise in October, according to the median estimate of 33 economists surveyed by Bloomberg. Inflation reached a three-year high of 6.5 percent in July.
China may have “moderate inflation” for a long time, the China Daily reported today, citing Sheng Laiyun, a spokesman for the National Bureau of Statistics.
ICBC, the nation’s biggest listed lender, lost 1.9 percent to 4.20 yuan. Bank of China Ltd. (3988), the third-largest by assets, dropped 1 percent to 2.93 yuan. Agricultural Bank of China Ltd. (601288), the fourth-biggest, retreated 1.5 percent to 2.56 yuan.
Chinese banks’ exposure to the property market is understated, Charlene Chu, head of China financial institutions at Fitch Ratings, told reporters on a teleconference yesterday.
The government will extend property control measures next year, the Shanghai Securities News reported, citing Zhao Luxing, real estate department head at the Ministry of Housing and Rural Development’s policy research center.
Loan limits to curb inflation and home-purchase restrictions to prevent a property bubble have spurred price drops in cities including Beijing and Shanghai. Officials are still grappling with the aftermath of record lending in 2009 and 2010 which fueled price gains and led to credit risks for banks.
Commodity companies declined. Tongling Nonferrous Metals, China’s second-biggest copper producer, retreated 1.1 percent to 18.60 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal and also called Chalco, lost 0.8 percent to 7.66 yuan, its lowest since February 2009.
Nomura cut its estimate for China’s economic growth next year to 7.9 percent from 8.6 percent as investment in private housing slows and exports moderate, economists led by Zhang Zhiwei said in an e-mailed report today. Monetary policy will be loosened gradually and moderately in 2012, he said.
The euro area’s six AAA-rated countries are among the 15 nations to be placed on a negative outlook, and their credit ratings may be cut depending on the result of a summit of European Union leaders on Dec. 9, S&P said yesterday in a statement.
The downgrade warnings come as German Chancellor Angela Merkel and French President Nicolas Sarkozy push for a rewrite of the EU’s governing rules to tighten economic cooperation in a demonstration of unity on ending the debt crisis.
Zhejiang Bangjie Digital Knitting, which derives 49 percent of sales from Europe, slid 2.9 percent to 21.96 yuan. Shandong Hiking International Co. (600735), a textile manufacturer that relies on Europe for 26 percent of its revenues, dropped 3.6 percent to 8.49 yuan, its lowest close since July last year.
Asian economies are facing “much greater downside risks” now because of the possibility of a recession in the U.S. and Europe and the threat of destabilizing capital flows, the Asian Development Bank said.
The biggest challenge for policy makers in emerging East Asian nations is to safeguard growth against the threat of another global economic crisis, the Manila-based lender said in its Asia Economic Monitor report today. Uncertainty over the world economy means officials in the region must have “sufficient flexibility” to adjust policies quickly, it said.
China may cut the reserve requirement for banks again around Chinese New Year, the China Securities Journal reported today on its front page, without citing anyone. January and February are an “important window” for lowering the requirement, it said.
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