China’s stocks fell for a fourth day on concern the nation’s economic growth will slow further as the government maintains tight monetary policies to fight inflation and Europe’s debt crisis worsens.
Anhui Conch Cement Co., China’s biggest cement producer, declined 5.2 percent, capping a three-day loss of 16 percent. Yunnan Copper Industry Co. slid to the lowest in more than a year as copper prices declined. The stock market’s losses were limited as PetroChina Co., the nation’s most valuable company, rebounded from a record low.
“The situation is getting worse overseas and the slowdown will drag down China’s economic growth,” said Yang Delong, a fund manager at China Southern Fund Management Co., which oversees $21 billion. “The market will continue to be volatile and head lower in the short term.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 8.2 points, or 0.3 percent, to 2,470.52 at the 3 p.m. close, the lowest level since July 16, 2010. The CSI 300 Index fell 0.8 percent to 2,723.30.
The Shanghai gauge has slumped 12 percent this year as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain inflation. It is valued at 11.4 times estimated earnings, a record low, according to daily data compiled by Bloomberg.
China will release inflation data for August on Sept. 9. Consumer-price gains may have slowed to 6.2 percent last month from a three-year high of 6.5 percent in July, according to the median estimate of 26 economists surveyed by Bloomberg News.
The nation’s economic growth may slump to 7 percent if the government doesn’t ease monetary policy immediately, Wang Jian, secretary-general of the China Society of Macroeconomics, affiliated with the National Development and Reform Commission, said in an interview with Hexun.com.
Expansion may drop to about 7 percent by the first quarter of next year and may dip even lower if the world economy deteriorates, Wang said.
Anhui Conch declined 5.2 percent to 18.69 yuan, the lowest since Jan. 25. The stock has fallen 28 percent over the past month. The supply-demand outlook for the cement industry is deteriorating, Credit Suisse Group AG analysts led by Trina Chen wrote in a note to clients.
Sany Heavy Industry Co., the biggest Chinese machinery maker by market value, slid 2.3 percent to 15.41 yuan today. The shares fell amid concern slowing investment in housing and railways will curb demand for building materials.
European stocks tumbled yesterday, with the Stoxx Europe 600 Index posting its biggest two-day drop since March 2009, as investors speculated that support for bailing out Europe’s indebted nations may fade. German Chancellor Angela Merkel’s party suffered its fifth election loss this year on Sept. 4 after she failed to sway voters in her home state with a campaign based on her handling of the euro-area debt crisis.
Standard & Poor’s 500 futures expiring in September lost 1.9 percent at 3:25 p.m. U.S. markets were closed for a holiday yesterday. China’s financial markets will be shut on Sept. 12 for the mid-autumn holiday.
Exports to the European Union accounted for 19 percent of China’s total shipments in the first seven months of this year, followed by 17 percent to the U.S., according to Chinese customs statistics.
Yunnan Copper dropped 3.1 percent to 18.79 yuan, the lowest since July 19, 2010. Jiangxi Copper Co., China’s biggest producer of the metal, lost 0.8 percent to 31.20 yuan, the lowest since Aug. 22. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum slid 1.6 percent yesterday.
PetroChina, the nation’s largest oil producer, advanced 1 percent to 9.70 yuan. The company traded at 12.5 times earnings yesterday, the lowest since its listing in November 2007.
Cash Flow Outlook
Chinese companies’ cash flow situation in the first half of this year is similar to levels during the 2008 financial crisis and will worsen in the third and fourth quarters, according to BNP Paribas SA.
Operating cash flows will worsen because of the absence of policy easing measures and pressure from potentially slower property sales and weakening external demand, Dorris Chen, BNP’s China strategist, said in a report. Slower new investments, higher funding costs and greater dilution risks from capital raising may trigger further downgrades in earnings estimates, she said.