China’s CSI 300 Falls to Five-Year Low on Yuan, Growth Concerns

China’s CSI 300 Index (SHSZ300) fell to the lowest level in five years, while Chinese stocks in Hong Kong entered a bear market after the yuan weakened and Goldman Sachs Group Inc. reduced the nation’s economic growth forecast.

BYD Co. (002594), the automaker backed by Warren Buffett’s Berkshire Hathaway Inc., plunged more than 7 percent in Shenzhen and Hong Kong after the company’s first-quarter profit forecast trailed estimates. Aluminum Corp. of China Ltd. and Yanzhou Coal Mining Co. slid at least 2.4 percent to lead declines for material and energy producers. Yonyou Software Ltd. slumped 8.9 percent, halting a three-day, 17 percent rally.

The CSI 300 fell 1.6 percent to 2,086.97 at the close, the lowest since Feb. 2, 2009. The Hang Seng China Enterprises Index (HSCEI) dropped 1.7 percent to 9,203.07, extending a slide to 21 percent since Dec. 2. The Shanghai Composite Index (SHCOMP) lost 1.4 percent to 1,993.48. Goldman Sachs cut its growth forecast for China’s gross domestic product to 7.3 percent from 7.6 percent. The yuan sank to one-year lows in onshore and offshore trading.

“There are continuing concerns about the GDP growth, which lead to brokerages like Goldman Sachs cutting their forecast,” Zhang Haidong, an analyst at Tebon Securities Co., said in Shanghai.

Yuan depreciation also weighed on sentiment though the market’s losses may be limited in the short term given speculation the government may take measures to bolster the economy, he said. China’s cabinet said yesterday it will accelerate measures to stabilize growth, while regulators allowed property companies to raise money through share sales for the first time since 2010.

Capital Outflows

The CSI 300 measure has fallen 10 percent this year on concern a weaker yuan will trigger capital outflows and as a private developer’s collapse spurred concern the industry may face defaults. The index trades at 7.8 times projected 12-month earnings, compared with 9 for the MSCI Emerging Markets Index, according to data compiled by Bloomberg.

Chalco, as the biggest aluminum producer is known, lost 2.8 percent to 3.17 yuan. The company plans to cut 2014 capital expenditure and 30 percent of its smelting capacity, according to a note by UOB Kay Hian Holdings Ltd. Yuan Li, a spokesman for Chalco’s parent group, didn’t answer calls by Bloomberg to confirm the target. Yanzhou paced losses for coal producers, retreating 2.4 percent to 6.07 yuan.

Goldman Sachs lowered its growth forecast for China to 7.3 percent from 7.6 percent after disappointing trade and consumption data, strategists led by Li Cui wrote in a note. Official data released in March showed the steepest slide in exports since the global financial crisis and the slowest growth in factory output for the January-to-February period since 2009, highlighting the challenges for Premier Li Keqiang in achieving his growth target of 7.5 percent for this year.

Economic Measures

China will “seize the moment to roll out already-determined measures in expanding domestic demand and stabilizing growth,” the State Council said in a statement last night after a meeting. The nation will “accelerate preliminary work and construction on key investment projects with timely assignment of budgeted funds,” the cabinet said.

BYD slumped 7.3 percent in Shenzhen and 14 percent in Hong Kong. Nomura Holdings Inc. said in a note the company’s first-quarter forecast is lower than expected. BYD estimated net profit of up to 15 million yuan in the first three months, implying a decline of up to 96 percent from a year earlier. Yonyou Software slid 8.9 percent to 19.94 yuan, paring this year’s rally to 44 percent.

Two Chinese developers received regulatory approval for new-stock sales, the first the government has allowed by real estate companies in about four years, after home sales fell and a developer collapsed.

Property Fundraising

The China Securities Regulatory Commission said yesterday Tianjin Tianbao Infrastructure Co. and Join.In Holding Co. are allowed to sell yuan-denominated A shares in private placements, according to separate statements to Shanghai and Shenzhen stock exchanges. Tianjin Tianbao added to yesterday’s 10 percent rally, surging 4.2 percent to 5.98 yuan. Join.In slipped 3.9 percent after jumping by the daily limit yesterday.

The Bloomberg China-US Equity Index slumped 1.1 percent yesterday after the U.S. Federal Reserve signaled it may raise interest rates from the middle of next year.

The yuan slid 0.29 percent to 6.2144 per dollar in Shanghai, China Foreign Exchange Trade System prices show. The currency touched 6.2233 earlier, the lowest since March 5, 2013, and dropped 1.25 percent in five days.

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

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

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