China’s stocks fell, dragging the benchmark index down by the most in about a month, after foreign direct investment in the country unexpectedly declined.
Financial shares slumped. Industrial & Commercial Bank of China Ltd. posted its biggest loss since March 10 and China Vanke Co. retreated 1.7 percent. China CAMC Engineering Co. paced declines by industrial companies. Foreign direct investment dropped 6.7 percent in May from a year earlier, the most since January 2013, official data showed today. The median forecast in a Bloomberg survey called for a 3.2 percent gain.
The Shanghai Composite Index (SHCOMP) slumped 0.9 percent to 2,066.70 at the close. The gauge reached its highest level since April 18 yesterday as the central bank extended a reserve-requirement cut to more lenders and retail sales picked up in May, offsetting concern that declining home prices will hurt economic growth.
“The poor reading indicates concerns among global investors about China’s growth outlook and financial risks as well as its competitiveness,” said Dariusz Kowalczyk, senior economist at Credit Agricole SA in Hong Kong. “However, it does not change the big picture: the economy has stabilized and is on track to a recovery, but this is subject to a threat coming from the real estate market.”
The CSI 300 Index lost 1 percent. Hong Kong’s Hang Seng China Enterprises Index (HSCEI) fell 0.7 percent at 3:35 p.m.
A gauge tracking financial companies in the CSI 300 slid 1.1 percent. ICBC fell 1.3 percent. Ping An Insurance (Group) Co. declined 1.3 percent. Industrial Bank Co. retreated 1.5 percent from a two-month high. China Vanke, the nation’s biggest developer by market value traded on mainland exchanges, dropped 1.7 percent.
Borrowers from China had $14.2 trillion in debt at the end of last year, exceeding every other country including the U.S., which had $13.1 trillion in company obligations, according to a report dated June 15 by Standard & Poor’s. Needs of Chinese issuers will increase to $20 trillion through the end of 2018, a third of the $60 trillion in global funding needs.
“Higher risk for China’s borrowers means higher risk for the world,” Jayan Dhru, S&P’s global head of corporate ratings in New York, wrote in the report. “The U.S. continues on the path to economic recovery while the euro zone struggles with marginal growth, but the bottom line is that this is a China story.”
A measure of industrial companies retreated 1.2 percent, falling for the first time in six days. China CAMC Engineering dropped 4.2 percent. Shanghai Waigaoqiao Free Trade Zone Development Co. slumped 2 percent.
China’s home sales in the January-to-May period fell 9.2 percent from a year earlier by area, National Bureau of Statistics data showed last week. New property construction dropped 18.6 percent this year through May and residential housing starts fell 21.6 percent by area.
Other data released last week signal that government measures to stabilize the economy, including speeding up public investment and fiscal spending, are starting to take effect. Retail sales growth topped forecasts in May, accelerating to 12.5 percent from 11.9 percent the previous month.
Yuan forwards fell for a second day after a report showed the amount of capital that flowed into the nation last month was the least since August.
Yuan positions at financial institutions accumulated from foreign-exchange purchases, a barometer of inflows, rose 38.7 billion yuan ($6.2 billion) from a month earlier, compared with a 117 billion yuan increase in April, data showed yesterday.
Premier Li Keqiang arrived in the U.K. yesterday and will meet Queen Elizabeth II at Windsor Castle today before traveling to London to meet Prime Minister David Cameron at his Downing Street residence. Li is expected to announce that China Construction Bank Corp. will be the clearing bank for London’s yuan trading, the Wall Street Journal reported yesterday, citing unnamed people.