China Stocks Drop for 1st Day in Three on Growth Concern
China’s stocks dropped for the first time in three days as concerns about slowing economic growth overshadowed speculation the government is accelerating measures to support the nation’s equities market.
Jiangxi Copper Co. (600362) led a gauge of material producers to the biggest slump among industry groups as rising copper inventories signaled weak Chinese demand. China Construction Bank Corp. (939) paced declines for lenders on the prospect of a cash shortage as the money market rate jumped to a three-month high. Sichuan Guodong Construction Co. (600321) and Sichuan Expressway Co. rose more than 4 percent after China National Radio said the provincial government proposed $582 billion of projects.
“There’s no catalyst for the market and the economy is still on a slowing trajectory,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “Investment opportunities may come up in the short term when stocks are oversold. There’s no big rally.”
The Shanghai Composite Index (SHCOMP) fell 0.2 percent to 2,029.29 at the close, after changing directions at least 10 times. The CSI 300 Index (SHSZ300) slipped 0.2 percent to 2,210.15. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 0.1 percent. The Bloomberg China-US 55 Index (CH55BN) fell 0.3 percent in New York yesterday.
The Shanghai Composite has fallen 7.7 percent this year on concern the government isn’t loosening monetary policy or introducing stimulus policies fast enough to counter the slowdown in the economy. It’s valued at 9.4 times estimated earnings, compared with the average of 18 since Bloomberg began compiling the weekly data in 2006. Thirty-day volatility was at 17.4 today, compared with this year’s average of 17. About 4.8 billion shares changed hands in the gauge, 38 percent lower than the daily average this year.
Growth Forecast Cut
Standard & Poor’s cut its 2012 forecast for China’s growth by half a percentage point to 7.5 percent, saying the government has not introduced stimulus sufficient to sustain an 8 percent growth rate. The government is concerned about re-igniting inflation and a property bubble, the ratings company said in a statement yesterday.
HSBC Holdings Plc lowered its 2012 target for the Shanghai Composite to 2,100 to reflect slower growth, according to a report today by Steven Sun, the head of China equity strategy.
“A cyclical market rebound may be in the cards for both the A- and H-share markets if growth stabilises and the transition of power goes smoothly,” he said.
A measure of material stocks lost 1.3 percent today, the most among the CSI 300’s 10 industry groups. Jiangxi Copper, China’s biggest producer of the metal, dropped 1.5 percent to 21.88 yuan. Tongling Nonferrous Metals Group Co. (000630), the second largest, retreated 1.7 percent to 18.98 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal, fell 1.6 percent to 4.86 yuan.
Copper inventories at bonded warehouses in Shanghai probably climbed to a record as import premiums dropped to a four-month low, signaling demand in China may not be improving as much as expected after a summer lull. Reserves were 650,000 metric tons, according to the median of nine estimates from traders, analysts and warehouse managers, compiled by Bloomberg.
Construction Bank, the nation’s second-biggest listed lender, dropped 0.5 percent to 3.83 yuan. China Minsheng Banking Corp. (600016), the nation’s first privately owned bank, sank 0.7 percent to 5.49 yuan. Huaxia Bank Co., partly owned by Deutsche Bank AG, lost 0.6 percent to 7.86 yuan.
The seven-day repurchase rate, which measures interbank funding availability, gained 19 basis points to 4.7 percent as of 3:14 p.m. in Shanghai, the highest level since June 28, according to a weighted average compiled by the National Interbank Funding Center.
The central bank added a record 290 billion yuan ($46 billion) to the financial system by using reverse-repurchase agreements, seeking to address a cash squeeze in the run-up to a weeklong holiday.
The government granted $9.2 billion quotas to qualified foreign institutional investors this year through Sept. 19, according to State Administration of Foreign Exchange statement published on its website yesterday. The government had approved a combined $30.8 billion in quotas as of Sept. 19 since the start of the QFII program, the statement said.
The foreign exchange regulator said in May it plans to quicken QFII approvals. The China Securities Regulatory Commission in June said the government will cut the minimum requirement on assets under management to $500 million from $5 billion, lowering the entry barrier for companies seeking a license under the QFII program. About 75 percent of total QFII assets are invested in yuan-denominated stocks, known as A shares, with the rest in bonds and deposits, according to a CSRC statement in April.
The Shanghai Stock Exchange completed a 10-day road show in North America after visiting more than 30 institutional investors in the U.S. and Canada, the bourse said in a press release yesterday. The main purpose of the road show was to brief foreign investors on the latest developments in China’s capital markets and changes in QFII rules, it said.
Sichuan Guodong jumped 9.9 percent to 2.44 yuan. Sichuan Expressway (601107) gained 4.7 percent to 3.10 yuan. Sichuan Chuantou Energy Co. added 2 percent to 6.70 yuan.
The western province of Sichuan proposed 2,242 projects, the China National Radio reported yesterday after the market closed, citing Tang Limin, the head of local development and reform commission. The projects include ones in hydropower, agricultural, transportation and energy industries, according to the report.
A leading index for China’s economy rose at a faster pace in August. The gauge gained 1.7 percent from July to 240.4, the biggest rise in seven months, the Conference Board, a New York- based research group, said in a statement today, citing a preliminary reading. That compared with a revised 0.6 percent gain in the previous month.
--Zhang Shidong. Editors: Allen Wan, Chan Tien Hin
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