China’s Stocks Decline on Credit Growth Slowdown, IPO Sales

China’s stocks fell, as financial companies slumped after credit growth slowed and concern grew that rising share supply from initial public offerings will sap demand for existing equities.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, and Huaxia Bank Co. slid at least 1.7 percent. Great Wall Motor Co., the largest maker of sport-utility vehicles, dropped 3.6 percent, extending losses after it delayed the introduction of a model. Anhui Conch Cement Co. (600585) climbed 4 percent after it estimated 2013 profit rose about 50 percent.

The Shanghai Composite Index (SHCOMP) dropped 0.2 percent to 2,023.35 at the close. China’s broadest measure of new credit fell in December while money-supply growth and new yuan loans trailed estimates amid a cash crunch and government efforts to curb speculative lending.

“It’s a signal monetary policy going forward will be slightly tight this year as the government wants commercial banks to deleverage,” said Wu Kan, a money manager at Dragon Life Insurance Co., which oversees about $3.3 billion. “That’s not good news for the stock market.”

The CSI 300 Index lost 0.2 percent to 2,208.94. The Hang Seng China Enterprises Index rose 0.6 percent after the World Bank raised its global growth forecasts. The ChiNext index of smaller companies rose 1 percent to 1,415.32, 0.51 point shy of the record close on Oct. 9.

Trading volumes in the Shanghai Composite were 21 percent below the 30-day average, according to data compiled by Bloomberg.

Bank Lending

A measure of financial stocks in the CSI 300 fell 0.9 percent, the biggest loss among the 10 industry groups. ICBC dropped 1.7 percent to 3.46 yuan. Huaxia Bank, partly owned by Deutsche Bank AG, slid 2.4 percent to 8.01 yuan. China Construction Bank Corp. (601939) sank 0.8 percent to 3.97 yuan.

New loans were 482.5 billion yuan ($79.8 billion) in December, the central bank said today. That missed the median estimate of 570 billion yuan in a Bloomberg survey. Aggregate financing dropped to 1.23 trillion yuan last month from 1.63 trillion yuan a year earlier. Growth in money supply slowed while foreign-exchange reserves rose to a record.

“The picture going forward is for a slowdown in credit growth,” said Yao Wei, China economist at Societe Generale SA in Hong Kong.

The Shanghai Composite has slumped 4.4 percent in 2014 amid concern slowing growth will curb profits and the resumption of IPOs will divert funds. It trades at 7.6 times 12-month projected earnings, the cheapest going back to at least 2007 based on weekly Bloomberg data.

Lower Targets

At least seven Chinese provinces are setting lower growth targets for this year than in 2013, adding to signs that expansion will slow as the government focuses on policies to sustain the economy in the long term. The World Bank cut its forecast for China this year to 7.7 percent from 8 percent.

The statistics bureau is scheduled to release data for fourth-quarter economic growth on Jan. 20. Growth probably decelerated to 7.6 percent from 7.8 percent in the previous quarter, according to a Bloomberg survey of 34 economists.

Foshan Haitian Flavoring and Food Co. plans to sell IPO shares in Shanghai, bringing to 52 the number of companies that have gotten approval after a more than one-year freeze, according to Bloomberg calculations.

The China Securities Regulatory Commission may check the pricing process for companies pursuing IPOs, the 21st Century Business Herald reported today, without citing anyone. The regulator announced rules in November aimed at strengthening investor protection and stamping out price manipulation.

Anhui Conch

Great Wall Motor lost 3.6 percent to 37.30 yuan, adding to a 6.2 percent decline this week. The automaker pushed back the debut of its Haval H8 to fix technical deficiencies.

Anhui Conch advanced 4 percent to 16 yuan. The cement maker attributed the increase in profit to rising sales, product prices and lower costs.

Jiangsu Phoenix Publishing & Media Corp. (601928) added 1.1 percent to 9.98 yuan. Jiangsu Phoenix partnered with Eastman Kodak Co. to use the U.S. company’s printing technology to publish books on demand, Kodak Chief Executive Officer Antonio Perez said.

The Bloomberg China-US Equity Index added 1.8 percent in New York yesterday. Yingli Green Energy Holding Co. (YGE) is leading a rally this month among Chinese solar-panel makers traded in New York as the company predicts it will post its first profit in three years as soon as the second quarter.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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

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