China’s Stocks Fall for Third Day on Concern Over Global Economic Slowdown

China’s stocks fell for a third day, the longest losing streak in almost two months, on concern a global slowdown will hurt earnings.

Jiangxi Copper Co. paced losses by raw materials producers after commodity prices slid the most this year. China Life Insurance Co. (601628) slipped to a two-month low after the nation’s biggest insurer said profit may have fallen as much as 50 percent in 2011. China Eastern Airlines Corp., the nation’s second-largest carrier, sank 0.7 percent after Chairman Liu Shaoyong said he expects a “big” drop in travel-demand growth.

“Corporate earnings aren’t looking very promising and expectations about first-quarter profits may be pessimistic amid the slowdown,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

The Shanghai Composite Index (SHCOMP) sank 15.65 points, or 0.7 percent, to 2,394.79 at the close. The three-day, 2.7 percent drop is the longest string of declines since a four-day period ended Jan. 16. The CSI 300 Index (SHSZ300) lost 0.7 percent to 2,603. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 2.3 percent yesterday in New York.

China cut its 2012 economic growth target to 7.5 percent on March 5, down from 8 percent over the past seven years, as the European debt crisis and sluggish U.S. recovery crimp demand for goods from the world’s largest exporter.

Stock Valuations

The Shanghai Composite has gained 8.9 percent 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 9.9 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.

Commerce Minister Chen Deming said exports rose about 7 percent over the first two months of the year, suggesting that February’s number will be less than economists had forecast. The economy of Europe, China’s biggest trading partner, shrank 0.3 percent in the fourth quarter, data released yesterday showed. Europe accounts for about 18 percent of China’s exports, according to Shenyin & Wanguo Securities Co.

Jiangxi Copper, China’s biggest producer of the metal, dropped 3.1 percent to 25.61 yuan. Zijin Mining Group Co., the nation’s largest gold producer, lost 1.6 percent to 4.46 yuan. Aluminum Corp. of China Ltd., the listed unit of the biggest maker of the lightweight metal, slid 1.4 percent to 7.23 yuan.

Outbound Shipments

The Standard & Poor’s GSCI Spot Index of 24 commodities sank 1.5 percent yesterday in New York, the biggest loss since Dec. 14. Copper slid 3.2 percent in New York and gold retreated 1.9 percent.

China’s outbound shipments gained about 7 percent over January and February combined, while imports rose more than that, Chen said today during a briefing in Beijing at the annual meeting of the National People’s Congress. The median forecast in a Bloomberg News survey compiled before he spoke was for a 32 percent gain in February from a year earlier.

China, the world’s second-largest economy, expanded 8.9 percent in the last three months of 2011, the least in 10 quarters. Consumer prices rose 4.5 percent in January and 5.4 percent in 2011, while the government maintained a goal of 4 percent for this year. The government is scheduled to report inflation data for February on March 9.

‘Volatile Trading’

“There’s no big risk of a sharp slowdown in the economy but there’s no big catalyst either that’ll convince everyone that the economy will pick up strongly soon,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “We’ll face volatile trading going forward.”

China Life slipped 1.1 percent to 17.50 yuan, its lowest close since Jan. 9 and extending yesterday’s 3.5 percent decline. Net income for 2011 may have dropped by 40 percent to 50 percent from a year earlier based on Chinese accounting standards, the company said in a statement yesterday. The decrease was due to “the decline in investment yield and the increase in impairment losses caused by the fluctuation in the capital market,” according to the statement.

American depository receipts of China Life slid 8.5 percent yesterday in New York, boosting to 5.9 percent the discount to the insurer’s Hong Kong-listed shares. The discount is the biggest in seven months.

Profit of China Life fell 46 percent in the third quarter, while Ping An Insurance Group Co. and China Pacific Insurance Group Co., the nation’s second- and third-biggest insurers, also reported net income drops for the three months to Sept. 30.

Travel Demand

China Eastern dropped 0.7 percent to 4.22 yuan. Chairman Liu said demand for international passenger and cargo flights is “clearly falling,” predominately because European consumers are cutting spending, Liu told reporters in Beijing yesterday. There will also be a “big difference” in full-year travel growth in 2012 from the previous year, he said.

The China Banking Regulatory Commission will study stock investment by bank wealth management product funds, the Shanghai Securities News reported today, citing Assistant Chairman Yan Qingmin. The regulator may limit the proportion of stock investment by the funds to control risk, it said.

Legg Mason Global Asset Management is expecting an earnings “surprise” in China in the second half of this year as the economy improves, according to Crystal Chan, the firm’s head of Hong Kong and China investments.

Suning Surges

Chinese equities offer “attractive” value and there is “upside” for stocks in the second half, Chan said at a briefing in Hong Kong today. Legg Mason is favoring shares of financial-services companies amid expectations the government will loosen its monetary policies, she said.

Suning Appliance Co., China’s biggest electronics retailer by market value, jumped 8.6 percent to 10.10 yuan. The retailer plans to expand both online and to add physical stores and has started selling books, daily necessities and other products in addition to electronics, Chairman Zhang Jindong was cited as saying by Sina.com.

FAW Car Co., which makes passenger cars in China with Volkswagen AG, rose 2.8 percent to 11.60 yuan. Sales at Volkswagen Group China, FAW Car’s German partner, increased 9.5 percent in the first two months of the year, according to the Xinhua News Agency.

--Zhang Shidong. Editors: Richard Frost, Ravil Shirodkar

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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