Shanghai Stock Index Falls to Lowest Since 2009; Vanke Advances

China’s stock indexes fell, dragging the Shanghai Composite Index (SHCOMP) to the lowest level since February 2009, on concern the economic slowdown is deepening.

Sany Heavy Industry Co. (600031) slumped to the lowest level in two years as the Securities Times reported China’s 2012 industrial output growth may slow. China Minsheng Banking Corp. tumbled to an 11-month low after JPMorgan Chase & Co. downgraded the stock and Sanford C. Bernstein & Co. signaled rising non-performing loans at Chinese lenders. China Vanke Co., the nation’s largest publicly traded property company, rose to a two-week high after August sales increased from July.

The Shanghai Composite Index dropped 0.3 percent to 2,037.68 at the close. The gauge pared an earlier loss of 0.7 percent as two shares gained for each one that fell. The CSI 300 Index (SHSZ300) decreased 0.2 percent to 2,199.88. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 1.7 percent. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. slumped 0.9 percent to 87.14 yesterday.

“Investors remain concerned about the economy and are worried macro data will be weak,” Zhang Gang, a strategist at Central China Securities Holdings Co., said by phone in Shanghai today. “They are hoping the government will come out with more stimulus measures to boost the economy.”

Signs that China’s economic slowdown is deepening have dragged the Shanghai Composite down 8.5 percent this quarter. The gauge sank 2.7 percent in August, a fourth straight month of declines. That’s the longest streak since the five months through August 2004, according to data compiled by Bloomberg.

Industrial Output

A government purchasing managers index released last weekend showed China’s manufacturing shrank for the first time in nine months. Data showed yesterday that U.S. manufacturing shrank for a third month in August in the longest decline since the nation’s recession ended in 2009.

China’s 2012 industrial output growth may slow to about 10 percent, from 13.9 percent in 2011 and 15.7 percent in 2010, Securities Times reported today, citing a joint report by the Ministry of Industry and Information Technology and the Chinese Academy of Social Sciences. The manufacturing industry is facing weakening demand and production overcapacity, according to the report.

Sany Heavy, China’s biggest machinery maker, slumped 3.7 percent to 8.95 yuan, the lowest close since Sept. 21, 2010. Zoomlion Heavy Industry Science & Technology Co. (000157), the nation’s second-biggest maker of construction equipment, retreated 1.3 percent to 7.86 yuan, the lowest close since Jan. 9. Taiyuan Heavy Industry Co. (600169) sank 1.2 percent to 2.58 yuan, the lowest close since Nov. 7, 2008.

Stimulus Tool

China may expand exporters’ tax rebates to help them cope with a slump in trade growth, according to three people with direct knowledge of the plan, deploying a stimulus tool used during the global credit crunch.

The government may give a full rebate of the 17 percent value-added tax on products including furniture, shoes and toys, up from the current range of 13 percent to 15 percent, said the people, who asked not to be identified because the discussions are private. The policy may be rolled out as soon as this month, depending on if trade remains weak, they said.

The Shanghai Composite trades at 9.2 times estimated profit, near the lowest level since January, according to weekly data compiled by Bloomberg. The measure’s 30-day volatility reading was at 11.9, compared with this year’s average of 17. About 5.7 billion shares changed hands in the gauge yesterday, about 27 percent lower than the daily average this year.

Steelmakers’ Losses

A gauge of energy companies in the CSI 300 Index dropped 1.4 percent, the most of 10 industry groups. Yanzhou Coal Mining Co. (600188) retreated 1.5 percent to 16.94 yuan, the lowest close since July 15, 2010. The price of Shandong coking coal fell 10 percent in the last week of August, Mizuho analyst Kelvin Ng said in a phone interview, citing sxcoal.com data. China Shenhua Energy Co., the nation’s largest coal producer, sank 1.9 percent to 21.04 yuan.

Angang Steel Co. (000898) lost 2 percent to 3.37 yuan, the lowest close since July 20, 2005. The combined July net loss for 80 large-to-medium-sized steel companies was 1.98 billion yuan ($312 million), China Business News reported, citing a document from the China Iron and Steel Association.

China Minsheng Banking Corp. (600016) dropped 3.7 percent to 5.47 yuan, the lowest close since October 2010, after it was cut to neutral from overweight at JPMorgan Chase & Co. Chinese banks’ overdue loans rose 29 percent in the first half, foreshadowing an increase in non-performing loans, Sanford C. Bernstein & Co. analysts wrote in a note. Industrial Bank Co. (601166) lost 1.5 percent to 11.94 yuan, the lowest close since July 26.

Higher Sales

A gauge of property companies in the Shanghai Composite Index rose 1.2 percent, the biggest advance among five industry groups, after China Vanke posted August sales of 11.35 billion yuan, according to a statement to the Shenzhen Stock Exchange. Vanke had sales of 10.4 billion yuan in July, according to an Aug. 3 statement.

Vanke shares climbed 1.1 percent to 8.32 yuan. Poly Real Estate Group Co., the second-largest developer in China, advanced 2.9 percent to 10.24 yuan.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., sank 1.8 percent yesterday, the steepest slump since July 23. American depositary receipts of Aluminum Corp. of China Ltd. also known as Chalco, lost 3.1 percent to $9.36, the lowest level since Nov. 20, 2008.

The Beijing-based company said Sept. 3 it dropped its C$925 million ($937 million) bid for Mongolian coal producer SouthGobi Resources Ltd. as it’s unlikely to win regulatory approval. Chalco’s plans to acquire a stake in SouthGobi have been hindered by the Mongolian government, which passed a law in May restricting foreign state-owned companies from controlling key assets. Chalco’s Shanghai-listed shares lost 1.4 percent to 4.97 yuan.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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

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