China Stocks Fall After Manufacturing Data Show Slower Expansion

China’s stocks fell, led by material and financial companies, after an official gauge of manufacturing expanded at the slowest pace in four months in June.

The Purchasing Managers’ Index was at 50.1, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. That was down from May’s 50.8 reading and matched the median forecast of 33 analysts in a Bloomberg News survey. Readings above 50 signal expansion.

The Shanghai Composite Index (SHCOMP) slid 0.8 percent to 1,963.04 at 9:33 a.m. local time, extending last week’s 4.5 percent slump, the biggest loss since the five days ended Feb. 22. The index’s 14-day relative strength measure, measuring how rapidly prices have advanced or dropped during a specified time period, was at 23.2. Readings below 30 indicate it may be poised to rise.

The CSI 300 Index declined 0.6 percent to 2,187.88. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, rose 0.8 percent on June 28.

The Shanghai measure slumped 14 percent last month, capping the biggest monthly loss since August 2009, amid concern higher costs for capital will curb economic growth as money-market rates jumped to records.

Trading volumes in the Shanghai Composite were 0.5 percent higher than the 30-day average today, while the 30-day volatility was at 23.1, the highest level since April 2, according to data compiled by Bloomberg.

Manufacturing Data

A reading from HSBC and Markit’s Purchasing Managers Index later today may be 48.3 based on economists’ estimates compiled by Bloomberg, below the 50 level that divides expansion and contraction. Weaker gains in manufacturing add to odds that Li Keqiang will become the first premier to miss an annual growth target since the Asian financial crisis in 1998.

President Xi Jinping said officials shouldn’t be judged solely on their record in boosting ross domestic product, the latest signal that policy makers are prepared to tolerate slower economic expansion.

The Communist Party should instead place more importance on achievements in improving people’s livelihood, social development and environmental quality when evaluating the performance of officials, the Xinhua News Agency reported June 29, citing Xi at a meeting on personnel management on the eve of the 92nd anniversary of the party’s founding.

China’s banking regulator, in his first public comments since the country’s worst cash crunch in at least a decade, said June 29 the operations of its lenders won’t be disrupted because they’ve built up sufficient cash reserves.

Credit Crunch

Banks had about 1.5 trillion yuan ($244.4 billion) of cash reserves as of June 28 that could be used for payment and settlement needs, more than double what is usually required, Shang Fulin, chairman of the China Banking Regulatory Commission, said in a speech in Shanghai.

The credit crunch has increased chances that the government will miss its 7.5 percent annual target for economic growth this year, according to Goldman Sachs Group Inc. Xi’s comments “reinforce our view” that there is a 30 percent chance growth may slump below 7 percent in the third or fourth quarter, said Zhang Zhiwei, Nomura Holdings Inc.’s chief China economist in Hong Kong.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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