China’s stocks fell, sending the benchmark index to the biggest loss in two weeks, on concern a slowdown in Asia’s largest economy will hurt earnings.
Anhui USTC iFlytek Co. sank 5.1 percent, leading technology shares lower. Yanzhou Coal Mining Co., the fourth-biggest Chinese coal miner, paced losses by commodity producers. Jilin Ji En Nickel Industry Co. (600432) fell 5.8 percent, as nickel slumped.
The Shanghai Composite Index (SHCOMP) slid 1.1 percent to 2,024.97 at the close, the most since April 28. The ChiNext index, which is dominated by private companies in industries such as technology, fell 1.9 percent, extending losses to 19.6 percent since the February peak. Data on industrial output, retail sales and investment released this week all trailed analysts’ estimates. President Xi Jinping said last week that China needs to adapt to a “new normal” in the pace of economic growth.
“The recent data confirms the fact that the economy isn’t in a good shape,” said Dai Ming, a money manager at Hengsheng Hongding Asset Management Co. in Shanghai, which oversees about $193 million. “There’s no reason that investors can find to justify buying stocks.”
The CSI 300 Index slid 1.3 percent to 2,144.08, while the Hang Seng China Enterprises Index (HSCEI) dropped 0.5 percent. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, slipped 0.2 percent yesterday.
The Shanghai measure has lost 4.3 percent this year on concern the growth slowdown will curb earnings and the potential resumption of initial public offerings will divert funds. The regulator hasn’t approved any listing of IPO shares since January as it reforms the process to make offerings more market-oriented.
The Shanghai index is valued at 7.5 times 12-month projected earnings, compared with the five-year average multiple of 11.8, according to data compiled by Bloomberg. Trading volumes were 20 percent below the 30-day average today.
China’s large-company stocks may fall as much as 20 percent this year as corporate earnings slump and a weakening property market hurts economic growth, according to Chen Li, UBS AG’s China equity strategist. The nation’s expansion may slow to as low as 7 percent in the third quarter, putting pressure on the government to cut interest rates, he said.
Analysts will have to lower their profit growth estimates for companies in the CSI 300 as the economic slowdown deepens and the depreciating yuan hurts real-estate developers which borrowed in dollars, Chen said in a May 13 interview at the Swiss bank’s office in Shanghai. The analysts expect earnings to grow about 14 percent on average this year, compared with UBS’s projection for a 3 percent drop, he said.
The Chinese currency has weakened 2.8 percent against the dollar this year, the biggest drop among a dozen Asian currencies tracked by Bloomberg.
‘Avalanche of Risks’
“Property and currency are the biggest risk,” said Hao Hong, the Hong Kong-based chief China equity strategist at Bocom International Holdings Co. “If not managed well, it will set off an avalanche of risks.”
Poly Real Estate Group Co., the nation’s second-largest developer by market value, fell 2 percent. China Vanke Co., the biggest, dropped 0.7 percent.
Anhui USTC lost 5.1 percent while Neusoft Corp. fell 4.9 percent. Nationz Technologies Inc. paced losses on the ChiNext, slumping 3.6 percent.
Measures tracking energy and material stocks in the CSI 300 retreated at least 1.7 percent. Yanzhou Coal retreated 4.9 percent while Jinduicheng Molybdenum, Asia’s largest producer of the metal used to harden steel, fell 6.1 percent.
Jilin Ji En Nickel Industry Co. plunged 5.8 percent, capping a three-day, 16 percent decline. Chengdu Huaze Cobalt & Nickel Material Co. (000693) plunged by the 10 percent daily limit. The two stocks jumped at least 36 percent last week. Nickel futures tumbled 4.6 percent in London, the biggest decline since December 2011, as some investors deemed a surge to a two-year high to be excessive amid signs of sufficient supply.
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at firstname.lastname@example.org