Chinese Stocks Fall for Third Day as Property Developers Decline

China’s stocks fell, with the benchmark index reversing gains in the last minutes of trading, as property and consumer staple companies declined.

China Vanke Co. (000002), the nation’s biggest developer, slid 1.8 percent after SouFun Holdings Ltd. said the nation’s home prices fell in May for the first time in two years. Inner Mongolia Yili Industrial Group Co. plunged the most in six months to lead declines by milk companies. SDIC Power Holdings Co Ltd. added 2.8 percent after gauges of manufacturing output increased and the government took steps to boost lending at some banks.

The Shanghai Composite Index (SHCOMP) fell less than 0.1 percent to 2,038.31 at the close, with about five stocks dropping for every three that rose. While the gains on manufacturing indexes and plans to cut reserve requirements for some lenders are positive, they’re not enough to counter concern that economic growth will slow, Everbright Securities Co. says.

“The factory data is good so it can support the market for a while,” said Zeng Xianzhao, an analyst at Everbright Securities. “However, investors are still undecided. The government has said that it will cut the reserve requirement ratio for lenders with specific criteria. This isn’t good enough: we need to see more concrete stimulus.”

The CSI 300 index lost 0.3 percent to 2,149.92. The Hang Seng China Enterprises Index (HSCEI) climbed 0.8 percent, while the Hang Seng China AH Premium declined 0.9 percent to the lowest level since Dec. 26. Markets in China and Hong Kong were closed for holidays yesterday, when the Bloomberg China-US Equity Index climbed 0.5 percent in New York.

Housing Slump

The Shanghai Stock Exchange Property Index slid 0.7 percent to its lowest level since May 22 and the biggest drop among five industry groups. China Vanke fell the most in a month. Gemdale Corp. lost 2 percent.

SouFun Holdings, the country’s biggest real estate website owner, said the nation’s residential prices fell month-on-month in May for the first time since June 2012.

A gauge of consumer staples sank 1.6 percent on the CSI 300. Inner Mongolia Yili Industrial Group slumped 7.8 percent. Bright Dairy & Food Co. retreated 3.8 percent, the most since April 28.

An index tracking power producers advanced 0.5 percent. SDIC Power surged to its highest level in five years.

The Purchasing Managers’ Index increased to 50.8 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said June 1, compared with the 50.7 median estimate of analysts surveyed by Bloomberg News. April’s reading was 50.4, with numbers above 50 indicating expansion.

Central Bank

A separate manufacturing PMI rose to 49.4 in May from 48.1 in April, the highest in four months, HSBC Holdings Plc and Markit Economics said today. The number was below the 49.7 median forecast in a Bloomberg survey.

The State Council, or cabinet, said May 30 it will cut the reserve-requirement ratio for lenders that have extended a certain amount of loans to rural borrowers and smaller companies. The People’s Bank of China will set up a re-lending facility for smaller companies and has set this year’s quota at 50 billion yuan ($8 billion), state television reported May 31.

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., added 0.7 percent to $37.12, a five-month high.

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 Richard Frost, Ravil Shirodkar

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