China’s Stocks Fall as Industrial Output Shows Deeper Slowdown

China’s stocks fell from a two-week high as slower-than-estimated growth in industrial output, fixed-asset investment and retail sales increased concern the economic slowdown is deepening.

Yunnan Chihong Zinc & Germanium Co. and Western Mining Co. (601168) slid more than 3 percent to lead declines for material stocks. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, retreated 0.6 percent after new local-currency loans slumped. China Vanke Co. and Poly Real Estate Group Co. both climbed 2.9 percent after a person with knowledge of the matter said regulators asked banks to speed up mortgage lending.

The Shanghai Composite Index (SHCOMP) slipped 0.1 percent to 2,050.73 at the close, after surging 2.1 percent yesterday for the biggest gain in seven weeks. Today’s data, combined with a report yesterday showing a drop in China’s broadest measure of new credit, signal the economy is losing momentum at a time when officials are reluctant to heed calls for monetary stimulus.

“The slowdown in economic growth is unchecked and the data reflects pretty weak fundamentals of the economy,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Stocks will continue to suffer as investors are concerned whether the government will take additional measures to bolster growth on top of increasing infrastructure spending.”

The CSI 300 Index slid 0.2 percent to 2,174.85. The Hang Seng China Enterprises Index (HSCEI) added 0.3 percent. The Bloomberg China-US 55 Index surged 2.4 percent in New York yesterday after China’s cabinet said it will deepen reforms of capital markets including relaxing limits on foreign investment in listed companies.

Economic Data

Factory production expanded 8.7 percent last month, the National Bureau of Statistics said today, compared with the median estimate of analysts for 8.9 percent growth. Retail sales rose 11.9 percent in April, compared with the forecast for 12.2 percent growth. Fixed-asset investment for the first four months climbed 17.3 percent, compared with the estimate for 17.7 percent growth.

“The economy is still slowing,” Wang Tao, chief China economist at UBS AG in Hong Kong, said in an e-mail. The government’s “mini-stimulus has not yet turned around the growth momentum,” and the government may ease credit by loosening restrictions on lending to homebuyers and local-government financing vehicles, Wang said.

A measure of material stocks in the CSI 300 lost 1.1 percent today, the most among the 10 industry groups. It jumped 4.4 percent yesterday after nickel prices rose to a two-year high. Yunnan Chihong fell 4.6 percent after jumping 8.5 percent yesterday. Western Mining retreated 3.9 percent for the first decline in seven days.

Coal Producers

China Shenhua Energy Co. (601088), the nation’s largest coal producer, dropped 2.3 percent. China Coal Energy Co., the second biggest, lost 4 percent. The two stocks surged at least 4.7 percent yesterday. Citic Securities Co. remains cautious on coal stocks because of weak demand and unattractive valuations compared with other cyclical companies, Zu Guopeng, an analyst at the brokerage, wrote in a report today.

ICBC fell 0.6 percent while China Citic Bank Corp. slid 0.9 percent. Aggregate financing was 1.55 trillion yuan ($249 billion) in April, the People’s Bank of China said yesterday after the market closed, compared with 2.07 trillion yuan in March. New local-currency bank loans were 774.7 billion yuan, down from 1.05 trillion yuan the previous month.

The Shanghai measure has dropped 3.1 percent this year on concern the growth slowdown will curb earnings and the potential resumption of initial public offerings will divert funds. The index is valued at 7.6 times 12-month projected earnings, compared with the five-year average multiple of 11.9, according to data compiled by Bloomberg. Trading volumes in the index were little changed from the 30-day average today.

Developers Gain

Vanke and Poly Real Estate, the nation’s biggest listed property developers, advanced 2.9 percent.

The China Banking Regulatory Commission told banks at a meeting yesterday to quicken home-loan approvals and loan distribution, and to price the loans reasonably, a person with knowledge of the matter said, asking not to be identified because the information wasn’t public.

Home sales fell 18 percent from a month earlier to 418 billion yuan in April, according to the difference between National Statistics Bureau data for the first four months of the year and the first quarter.

PetroChina Co. (601857), the nation’s biggest oil producer, rose 0.8 percent after it said it will sell assets valued at 39 billion yuan including the First and Second West-East Gas Pipelines, which carry natural gas from central Asian countries and the energy-rich region of Xinjiang to the nation’s eastern cities.

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

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

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