China’s Stocks Drop Most in Month on Growth, Policy Concerns
China’s stocks fell by the most in almost a month after Bank of America Corp. cut its economic growth forecasts for China and on speculation the government won’t loosen monetary policy as property prices rebound.
Anhui Conch Cement Co. (SHCOMP) led declines for construction material stocks after Bank of America joined Deutsche Bank AG and Barclays Plc in reducing growth forecasts for China. China Vanke Co. and Poly Real Estate Group Co. slid more than 4 percent after the Financial News said the central bank is being “cautious” in reducing banks’ reserve-requirement ratios to prevent home prices from rising further. Citic Securities Co. and Haitong Securities Co Ltd. (600837) plunged more than 8 percent on concern that a weak stock market will hurt brokerage earnings.
“Investors lack confidence in the market,” said Xu Shengjun, an analyst at Jianghai Securities Co. in Shanghai. “With bad economic data last week and more bad earnings, the market is set to continue falling. People are disappointed there are no new stimulus measures and the chance of major measures are unlikely.”
The Shanghai Composite Index fell 1.5 percent to 2,136.08 at the close, the biggest decline since July 16. The CSI 300 Index (SHSZ300) lost 2 percent to 2,351.93. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 0.8 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.5 percent in New York.
The Shanghai index has tumbled 13 percent from this year’s high on March 2 amid concern the economic slowdown is deepening. The index is valued at 9.5 times estimated profit, compared with the 17.5 average since Bloomberg began compiling the data in 2006. Thirty-day volatility in the Shanghai index was at 13.8 on Aug. 10, while 6.8 billion shares changed hands, 8.7 percent lower than the daily average this year.
Anhui Conch, the biggest Chinese cement producer, slid 4.3 percent to 14.40 yuan today, the biggest slump since June 25. Sany Heavy Industry Co., China’s largest machinery maker, tumbled 3.3 percent to 11.55 yuan, the lowest close since Dec. 21.
Bank of America cut its 2012 economic growth forecast for China to 7.7 percent from 8 percent. The bank also reduced its third quarter and fourth quarter growth estimates to 7.4 percent and 7.7 percent respectively, from 8 percent and 8.3 percent, according to a report from economist Ting Lu.
Growth prospects in developed economies are getting worse and further policy easing is constrained by the nation’s rebounding home prices and leadership transition, Lu wrote. There’s no recovery for export growth in sight, he wrote. Barclays Plc and Deutsche Bank AG also lowered their growth forecasts for China last week.
Government data showed last week that exports grew 1 percent after climbing 11 percent in June, missing the 8 percent median estimate of economists surveyed by Bloomberg. Policy makers cut interest rates in June and July after two reductions in banks’ reserve-requirement ratios this year as the economy expanded at the slowest pace since 2009.
Citic Securities slid 9.1 percent to 10.99 yuan. Haitong Securities declined 8.6 percent to 8.90 yuan. Haitong is scheduled to publish first-half earnings on Aug. 26 and Citic Securities on Aug. 30, according to the Shanghai Stock Exchange.
“Investors are worried that earnings will go downhill, and Chinese brokerages still rely a lot on stockbroking business,” said Zhang Yanbin, an analyst with Zheshang Securities Co. in Shanghai. “The economic fundamentals are not good so the outlook for the stock market is not optimistic.”
China has postponed reserve-ratio cuts as current reverse repurchase contract operations are sufficient to satisfy liquidity needs, the Financial News said in a commentary.
The market has been expecting a cut after repeat reverse repo operations, the commentary said. The central bank is “cautious” in reducing the ratio so as to keep the “spigot of funds” tight on the property market, keep home prices from rising and prevent a real estate bubble, the commentary said.
China Vanke, the nation’s biggest developer, fell 4.2 percent to 8.42 yuan, the lowest close since April 17. Poly Real Estate, the second largest, declined 4.1 percent to 10.19 yuan, the lowest close since April 24.
The State Council, or cabinet, is taking a “stricter tone” on property-market controls after inspection of local markets, Shanghai Securities News reported today, citing an unidentified person close to the inspection teams. The central government will take action if home prices rebound, it said.
Home prices in July posted the biggest gain in more than a year, according to SouFun Holdings Ltd., the country’s biggest real estate website owner. They rose 0.3 percent from June.
About 846 publicly traded companies’ second-quarter profit growth slowed to 0.1 percent from 3.9 percent in the first quarter, the China Securities Journal reported. Companies are required to release first-half earnings results in July and August.
Zijin Mining Group dropped 1.8 percent to 3.88 yuan. The gold producer’s first-half net income was 2.38 billion yuan ($374 million), compared with 2.98 billion yuan a year earlier.
China Merchants Property Development Co. slumped 4.6 percent to 20.11 yuan, the lowest close since March 29, after its first-half net income fell 17 percent to 1.2 billion yuan from a year earlier.
China Life Insurance Co., the biggest life insurer, dropped 5.1 percent to 17.90 yuan. Ping An Insurance Group Co. retreated 6.5 percent to 41.92 yuan. Chinese insurers had a combined 9.2 billion yuan loss from mandatory third-party liability vehicle insurance in 2011, according to a statement posted to the China Insurance Regulatory Commission’s website.
The China Securities Regulatory Commission has slowed the pace of reviewing applications for initial public offerings by companies, the China Securities Journal reported today, citing data from the securities regulator.
The CSRC didn’t review any IPO applications last week and may not take any this week, according to the newspaper.
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