China’s Stocks Slump Most in a Month on Slowing Growth Concern

China’s stocks fell, sending the benchmark index down the most in a month, on concern slowing growth will curb demand for building materials and dent profits.

Anhui Conch Cement Co. (600585), the nation’s biggest maker of the building material, tumbled 4.4 percent as property developer China Vanke Co.’s sales slumped. Vanke sank 0.9 percent. Industrial Bank (601166) Co. retreated the most in almost four months amid plans to sell new shares, while China Life Insurance Co. led declines by insurers amid concern premiums will slow.

“Investors are still concerned over whether the economy has reached bottom, though the risk of a hard landing is very low,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Stocks may face a correction in the short term after this year’s rally.”

The Shanghai Composite Index (SHCOMP) fell 34.56 points, or 1.4 percent, to 2,410.45 at the close, the biggest loss since Feb. 7 and paring this year’s gain to 9.6 percent. The CSI 300 Index (SHSZ300) declined 1.6 percent to 2,621.05. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 1.8 percent yesterday in New York.

The Shanghai gauge dropped 0.6 percent yesterday after Premier Wen Jiabao cut the economic growth target for this year to 7.5 percent from the 8 percent level in place since 2005, saying the nation needs to shift to a more sustainable economic model.

Stock Valuations

The Shanghai Composite has gained in 2012 following two years of losses on speculation the central bank will add to a Feb. 18 cut in reserve requirements to halt a slowdown in economic growth. Stocks in the index trade at 10 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

Anhui Conch fell 4.4 percent to 17.19 yuan. Gansu Qilianshan Cement Group Co. (600720) tumbled 6.3 percent to 11.27 yuan after it said profit dropped 32 percent last year. Huaxin Cement Co., the Chinese affiliate of Holcim Ltd., dropped 4 percent to 15.77 yuan.

Sales at Vanke, the nation’s biggest listed property developer, dropped 27 percent in the first two months of 2012 from a year earlier to 19.05 billion yuan ($3.02 billion). Sales last month slumped 40 percent from January, the company said. The stock dropped 0.9 percent to 8.42 yuan.

The government’s won’t relax curbs on property purchases because it wants to see prices return to reasonable levels, Zhang Ping, head of the National Development and Reform Commission, said at a briefing at the National People’s Congress in Beijing yesterday.

Declines Needed

Home prices need to fall by 20 percent to 30 percent to reach a reasonable level, the 21st Century Business Herald Reported today, citing He Keng, deputy director of Financial and Economic Affairs Committee of China’s National People’s Congress.

The government is studying widening the scope of its property tax trials, Finance Minister Xie Xuren said at a press briefing in Beijing today during the National People’s Congress.

Gemdale Corp (600383) slid 0.5 percent to 6.32 yuan. Hangzhou Binjiang Real Estate Group Co. (002244) fell 1.4 percent to 9.05 yuan.

Industrial Bank lost 3 percent to 13.88 yuan, its biggest loss since Nov. 16. The lender said it plans to raise 26.4 billion yuan selling new stock in a private sale to replenish core capital. Buyers include PICC Property & Casualty Co., the nation’s largest non-life insurer.

China Banking Regulatory Commission Chairman Shang Fulin said banks’ fund-raising this year won’t be “too large,” the Shanghai Securities News reported, citing an interview. Shang also said lenders can raise capital through private placements to reduce pressure on the market, according to the newspaper.

Slowing Premium

China Life, the nation’s biggest insurer, slid 3.5 percent to 17.69 yuan. Ping An Insurance (Group) Co. (601318), the second largest, fell 1.7 percent to 39.44 yuan. China Pacific Insurance (Group) Co., the third biggest, lost 2.5 percent to 20.24 yuan

Analysts including Capital Securities Corp.’s Xie Jiyong and Orient Securities Co’s Chen Hongxia said insurers may report “low” premiums for February.

The Chinese government is scheduled to report inflation data for February on March 9. Consumer prices probably rose 3.4 percent from a year earlier, from 4.5 percent in January, according to the median estimate of 31 economists in a Bloomberg survey.

Bets on swings in the yuan surged as policy makers signaled they may allow greater flexibility in the Chinese currency after it climbed 31 percent since 2005.

Implied volatility on one-month options for the yuan versus the dollar rose nine basis points, the most since December, to 1.87 percent in New York trading after Xinhua News Agency cited People’s Bank of China Governor Zhou Xiaochuan saying the nation may “appropriately” widen the currency’s trading band.

In the U.S., data on orders to factories signaled manufacturing is cooling. Bookings fell 1 percent in January after a revised 1.4 percent gain in December that was larger than previously estimated. European services and manufacturing output shrank in February more than earlier estimated, Markit Economics said.

--Zhang Shidong. Editors: Richard Frost, Darren Boey

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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

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