Chinese Stocks Slump Most in Three Weeks as Manufacturing Slows

Source: ChinaFotoPress/Getty Images

Investors watch the electronic board at a stock exchange hall in Fuyang, Anhui province. Close

Investors watch the electronic board at a stock exchange hall in Fuyang, Anhui province.

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Source: ChinaFotoPress/Getty Images

Investors watch the electronic board at a stock exchange hall in Fuyang, Anhui province.

China’s stocks fell, dragging the benchmark index down the most in three weeks, as a gauge of manufacturing for this month slowed more than estimated.

Anhui Conch Cement Co. slid 5.9 percent and Sany Heavy Industry Co. lost 3.9 percent, pacing declines by construction- related companies. China Minsheng Banking Corp. slumped 4.7 percent as financial companies retreated. The preliminary reading of a Purchasing Managers’ Index fell to 50.5 for April from 51.6 in March, according to HSBC Holdings Plc and Markit Economics, compared with the 51.5 median forecast of economists.

The Shanghai Composite Index (SHCOMP) declined 2.6 percent to 2,184.54 at the close, the biggest loss since March 28. The CSI 300 Index (SHSZ300) fell 3.2 percent to 2,449.47. The Hang Seng China Enterprises Index (HSCEI) retreated 1.8 percent in Hong Kong, taking this year’s drop to 9 percent.

“Economic data is likely to continue to be weaker in the second quarter,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “The government’s current policy is to be risk averse and focus on the restructuring of the economy, so data like today’s PMI is acceptable for them. As such, our recovery may be much weaker than we had hoped for and this will drag stocks.”

The Shanghai Composite has slumped more than 10 percent from a Feb. 6 high on concern slowing growth will hurt earnings. China’s economy expanded 7.7 percent in the first quarter, missing estimates, as industrial production and fixed-asset investments in March fell short of forecasts. Rising Chinese home prices may limit scope for stimulus as President Xi Jinping seeks to prevent a real-estate bubble.

‘Normal’ Growth

In Washington last week, central bank Governor Zhou Xiaochuan said the pace of growth was reasonable and “normal.”

Anhui Conch tumbled 5.9 percent to 18.10 yuan, its biggest drop since March 4. The company reported first-quarter net income fell to 972 million yuan ($157 million) from 1.25 billion yuan a year earlier. BBMG Corp. plunged 6.8 percent to 6.63 yuan. The cement producer said last week it expects a 60 million yuan loss in the first quarter.

China’s industrial growth is facing downward pressure amid slowing domestic and international demand, a Ministry of Industry and Information Technology official said. The lack of “efficient demand” and the unwillingness by companies to invest are among challenges to the industrial economy, Xiao Chunquan, a MIIT spokesman, said at a briefing in Beijing today.

Sany Heavy, China’s biggest construction equipment maker, lost 3.9 percent to 10.02 yuan.

Spending Slowdown

“This has been a very narrowly based recovery, predominantly driven by infrastructure investment, but now even infrastructure investment is also apparently slowing down,” said Tao Dong, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong.

Valuations on the Shanghai gauge fell to 9 times projected 12-month profits, compared with the seven-year average of 15.8, data compiled by Bloomberg show. Trading volumes in the Shanghai index were 4.6 percent higher than the 30-day average at the close, according to data compiled by Bloomberg.

A gauge tracking financial companies retreated 3.9 percent, the most among the CSI 300’s 10 industry groups. Minsheng Banking slid 4.7 percent to 9.76 yuan. China Merchants Bank Co. lost 3.6 percent to 12.14 yuan.

China’s local government financing vehicles will have to repay about 3.49 trillion yuan of loans over the next three years, China Business News reported, citing the country’s banking regulator.

Debt that will come due in that period accounts for about 37.5 percent of total loans to governments at the province, county and municipal levels, Shang Fulin, chairman of the China Banking Regulatory Commission, told an internal meeting, according to the newspaper. Two phone calls to the regulator’s press office by Bloomberg News went unanswered.

A gauge of property developers on the Shanghai Composite tumbled 3.6 percent. China Vanke Co., the nation’s biggest, lost 3.5 percent to 11.28 yuan, even as the company reported a 16 percent increase in first-quarter profit. Gemdale Corp. sank 4.9 percent to 6.99 yuan.

-- Editors: Richard Frost, Allen Wan

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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