China’s stocks fell to a one-week low as a report that showed manufacturing may contract this month overshadowed speculation the government will ease monetary policy to bolster the economy. [bn:WBTKR=600362:CH]
Jiangxi Copper Co.  and Aluminum Corp. of China Ltd. dropped more than 2 percent on concern that a manufacturing slump may curb demand for metals. China Shenhua Energy Co. paced declines for coal producers as coal for Asia’s power stations headed for the worst slump since the global financial crisis. China Vanke Co. and Poly Real Estate Group Co., the biggest developers, rose after the China Securities Journal said the central bank should cut lending rates to revive economic growth.
“The real economy is still slowing and hasn’t shown signs of picking up as the market expected,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “The concern about growth is back and that’ll weigh on sentiment.”
The Shanghai Composite Index (SHCOMP) dropped 2.42 points, or 0.1 percent, to 2,375.77 at the close. The CSI 300 Index (SHSZ300) slipped 0.2 percent to 2,583.75. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 1.2 percent in New York yesterday.
Thirty-day volatility on the Shanghai Composite was at 14.91, near a two-week low. About 13.1 billion shares changed hands in the gauge yesterday, or 4 percent higher than the daily average this year.
The Shanghai Composite has rebounded 8 percent this year on expectations the central bank will take measures to boost economic growth. Stocks in the index trade at 9.8 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed. The index has lost 22 percent over the past two years.
The preliminary manufacturing reading of 48.1 compares with a final 49.6 in February. A result above 50 points to an expansion and a number below 50 indicates contraction.
“The HSBC PMI tends to paint a more bearish picture China’s manufacturing sector at the moment,” Lu Ting, a Hong Kong-based economist at Bank of America Corp., said in a report. He said this PMI focuses more on smaller companies, which have been hurt by tighter liquidity and the companies surveyed may also have more “exposure” to exports.
A measure of material stocks in the CSI 300 slid 1.6 percent, the most among the 10 industry groups. Jiangxi Copper, the nation’s biggest producer of the metal, lost 2.1 percent to 25.89 yuan. Aluminum Corp. of China, the listed unit of the largest maker of the lightweight metal, fell 2.8 percent to 7.38 yuan. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111), China’s biggest producer of rare earth, slumped 5.5 percent to 66.45 yuan.
Thermal coal at the Australian port of Newcastle is set for the steepest drop over two quarters since the period ended March 2009. Prices are unlikely to recover in the next six months amid a glut of the fuel and slowing consumption, according to eight analysts, traders and producers surveyed by Bloomberg News.
Shenhua, the nation’s largest coal producer, dropped 0.7 percent to 26.10 yuan. Datong Coal Industry Co., the third biggest, lost 0.4 percent to 13.98 yuan.
China may be leaning towards loosening policy to support weakening growth based on signals such as the central bank’s measures to boost rural credit and a State Council meeting that discussed transport investment, Nomura Holdings Inc. said.
The government boosted rural credit by cutting reserve ratios for more branches of Agricultural Bank of China Ltd., the nation’s third-biggest lender by market value.
A total of 379 outlets in Heilongjiang, Henan, Hebei and Anhui will be covered in a trial that previously applied to 563 branches in eight provinces, the People’s Bank of China said on its website yesterday. Effective March 25, the ratio will fall by 2 percentage points for 565 branches, a move that the central bank said will free up 23 billion yuan ($3.6 billion).
Rate Cuts Needed
The central bank may choose to lower lending rates while keeping deposit rates unchanged, or conduct asymmetric rate cuts, the China Securities Journal said in a commentary. China needs to cut lending rates as reserve ratio cuts are not enough to drive “reasonable growth” in credit, according to the report.
Vanke, the nation’s biggest listed property developer, rose 0.6 percent to 8.23 yuan. Poly Real Estate, the second largest, added 1 percent to 10.75 yuan.
Branches of China Everbright Bank Co. and Hang Seng Bank Ltd. in the eastern city of Nanjing are giving a 10 percent discount on interest rates for some 1st-home buyers, National Business Daily reported, citing officials from the banks.
--Zhang Shidong. Editors: Allen Wan, Chan Tien Hin
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