China’s stocks fell, dragging the benchmark index to a one-month low, as property prices slumped in a record number of cities, fueling concern of a deepening economic slowdown.
China Vanke Co. and Poly Real Estate Group Co. (600048), the nation’s biggest developers by market values, sank 1.2 percent after home prices dropped in 46 of 70 cities in April. Jiangxi Copper Co. slid 1.2 percent on speculation slower economic growth will curb demand for metals. SAIC Motor Corp. (600104) dropped 1.9 percent as an industry association signaled that automobile dealers are struggling with a rising number of unsold cars that’s threatening to deepen price cuts.
“The slowdown in economic growth is more severe than we expected,” Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. said by phone today. “The risk of a hard landing still exists unless the government steps up monetary or fiscal measures to bolster growth.”
The Shanghai Composite Index (SHCOMP) fell 1.4 percent to 2,344.52 at the close. The gauge settled at its lowest level since April 17 after slumping 4.4 percent in the past two weeks. The CSI 300 Index (SHSZ300) lost 1.5 percent to 2,573.98. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 2.5 percent in New York yesterday.
The Shanghai index has dropped 4.7 percent from this year’s high set on March 2 amid concern slowing economic growth will hurt corporate profits. The MSCI BRIC Index of shares in Brazil, Russia, China and India retreated 21 percent from this year’s peak on March 2 through yesterday, a threshold analysts say marks a bear market, on concern Europe’s debt crisis and slower U.S. economic growth will curb exports.
A gauge of property stocks in the Shanghai Composite fell 1.7 percent. Vanke fell 1.2 percent to 8.58 yuan. Poly Real Estate, lost 1.2 percent to 12.73 yuan. Financial Street Holding Co. (000402) retreated 1.5 percent to 6.60 yuan.
The eastern city of Wenzhou led declines in home prices with a 12.3 percent slump in values from a year earlier, while prices in Beijing dropped 1 percent and Shanghai declined 1.3 percent, according to data released by the statistics bureau.
The Housing Ministry said yesterday China will steadfastly continue curbs on the housing market and won’t flip-flop on its policies, the Shanghai Securities Journal reported. This followed a pledge by the State Council, or Cabinet, last month to stick with existing property controls implemented over the past two years, where the government tightened down payments and mortgages, and imposed restrictions on the number of homes families can buy.
Today’s decline has trimmed the advance in the Shanghai index to 6.6 percent this year. Stocks in the measure are valued at 10.1 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg. Thirty-day volatility was at 15.12 today, near a two-month low. About 8.8 billion shares in Shanghai traded yesterday, 3 percent lower than the daily average this year.
Jiangxi Copper, China’s biggest producer of the metal, fell 1.2 percent to 25.12 yuan. Tongling Nonferrous Metals Group Co., the second largest, lost 2.7 percent to 20.70 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal, slipped 0.4 percent to 6.81 yuan.
The MSCI Asia Pacific Index (MXAP) slumped 2.6 percent today, extending a global rout. The Federal Reserve Bank of Philadelphia said yesterday its general economic index decreased to minus 5.8 in May, indicating an unexpected contraction in manufacturing. The index of leading economic indicators dropped in April for the first time in seven months.
Fitch Ratings downgraded Greece’s credit rating by one level yesterday, citing concerns the country won’t be able to muster the political support needed to sustain its membership in the euro area. Moody’s Investors Service also cut the credit ratings of 16 Spanish banks yesterday.
Europe and the U.S. are China’s biggest export markets, making up about 35 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.
“Europe and the U.S. will dominate sentiment in the short term,” Shanghai Kingsun’s Dai said. “Investors need to avoid risks.”
China’s economic growth may slow to 7.5 percent in the second quarter, matching the government growth target for this year, the China Securities Journal reported today, citing a report from the State Information Center’s economic forecasting department. Growth was 8.1 percent in the first three months, the slowest pace in almost three years.
SAIC Motor, China’s largest carmaker, lost 1.9 percent to 15.18 yuan. FAW Car Co., which makes passenger cars in China with Volkswagen AG, dropped 1.4 percent to 11.68 yuan. BYD Co. (002594), the automaker part-owned by Warren Buffett’s Berkshire Hathaway Inc., slid 3.7 percent to 24.20 yuan.
Dealerships for Honda Motor Co., Chery Automobile Co., BYD and Geely Automobile Holdings Ltd. carried more than 45 days of inventory as of the end of April, exceeding the threshold that foreshadows debilitating price cuts, Su Hui, vice president of the auto market division at the state-backed China Automobile Dealers Association, said in an interview yesterday.
Solar-related stocks fell after the U.S. imposed tariffs of 31 percent to 250 percent on imports of Chinese solar products, adding to duties imposed earlier of as much as 4.73 percent as a result of Chinese government subsidies, the Commerce Department said yesterday.
EGing Photovoltaic Technology Co. (600537) slumped 4.9 percent to 15.09 yuan, its lowest close since October 2009. Beijing Jingyuntong Technology Co., a manufacturer of solar equipment, tumbled 3.6 percent to 19.71 yuan.
The MSCI BRIC Index’s slide into a bear market has left equities in the biggest emerging economies trading at the lowest levels since 2009 versus global shares.
That’s still not cheap enough for Charles de Vaulx to add a single stock to his $9.7 billion IVA Worldwide Fund, which beat MSCI’s global gauge by 29 percentage points since its inception in 2008. He’s waiting for further declines of 10 percent to 20 percent before buying.
“For the time being, we have nothing in the BRICs,” de Vaulx said in a May 16 phone interview. “We’re starting to do some work, but we haven’t been willing to pull the trigger.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., fell for a record 12th day. The ETF dropped 2.2 percent to $33.19 yesterday, the lowest since Oct. 20. Stocks in the China-U.S. gauge are valued at 17 times estimated earnings, the lowest since April 2009, according to data compiled by Bloomberg.
--Zhang Shidong. Editors: Darren Boey, Richard Frost
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