China’s stocks fell on the first trading day of 2012 after Premier Wen Jiabao said business conditions may be “relatively difficult” this quarter as inflation stays “elevated” and overseas demand weakens.
China Cosco Holdings Co., Asia’s largest shipping line, plunged 3.9 percent after an index of export orders indicated a third month of contraction. Shenzhen Development Bank Co. and China Citic Bank Corp. paced a drop for lenders on speculation a recent cash crunch will worsen before the Chinese New Year holidays later this month. China Vanke Co. slid the most in six weeks after home prices declined for a fourth month.
“Investors are concerned about liquidity in the market and this adds to worries about the economic slowdown after Wen’s comments,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “We need reserve-ratio cuts for the liquidity issue to be eased.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 30 points, or 1.4 percent, to 2,169.39 at the close, the biggest loss since Dec. 15. The CSI 300 Index slid 2 percent to 2,298.75. China’s markets were shut yesterday and Jan. 2 for the holidays, while the MSCI Asia Pacific ex-Japan index gained 2 percent during that time. The Standard & Poor’s 500 Index climbed 1.6 percent yesterday.
The Shanghai Composite tumbled 22 percent last year, the most since 2008 and extending 2010’s 14 percent plunge, on concern increases in borrowing costs and Europe’s debt crisis will derail economic growth. The index’s 33 percent drop since 2009 makes it the worst performer among the world’s 15 biggest markets. The CSI 300 Index slid 25 percent in 2011.
“The Chinese market has been a pretty poor place for quite a long time now,” Michael Shaoul, chairman of Marketfield Asset Management in New York, said in a Bloomberg Television interview. “That market peaked in 2009. I would say you are somewhat further through the bear market in equities in China but much, much earlier in the bear market in the local real estate sector.”
An index of export orders was at 48.6 from 45.6 in November, still below 50, the dividing line between contraction and expansion, according to the Jan. 1 manufacturing report. The purchasing managers’ index was 50.3 in December, from 49 in November, exceeding all forecasts of 15 economists in a Bloomberg survey where the median estimate was 49.1.
China Cosco lost 3.9 percent to a record low of 4.50 yuan. China Shipping Container Lines Co., the country’s second-largest carrier of sea-cargo boxes, slumped 2.1 percent to 2.38 yuan.
The ruling Communist Party is shifting focus to supporting growth rather than damping inflation as Europe’s debt crisis threatens to curb exports.
‘We see downside pressure on our economy and elevated inflation at the same time,’’ Premier Wen said during a two-day trip to Hunan province, according to a statement on the government’s website yesterday. “We also face problems of weakening external demand and rising costs for companies.”
Economists at Barclays Capital and Bank of America Corp. say the central bank will cut lenders’ reserve requirements before a weeklong Chinese New Year holiday starts on Jan. 23, the second reduction since 2008. The People’s Bank of China raised interest rates three times and reserve ratios six times last year to cool inflation that accelerated to its fastest pace in three years in July.
“Investors had been waiting for reserve-ratio cuts during the holiday but it didn’t happen,” said Zhang Yanbin, an analyst with Zheshang Securities Co. ’’This was why the rally didn’t last. Still, stocks may still see a slight rebound in the near term as we lagged behind other markets in the past two days and the PMI was good.’’
China Construction Bank Corp., the nation’s second-biggest lender, slid 0.9 percent to 4.50 yuan. China Citic, a unit of the nation’s largest state-owned investment firm, fell 1.2 percent to 3.99 yuan. Shenzhen Development retreated 2.8 percent to 15.16 yuan.
The People’s Bank of China may suspend its weekly sale of three-month bills on Thursday as primary dealers have not submitted their bids for tomorrow’s sale, Market News International cited unidentified traders as saying today.
Gauges of technology and health-care companies in the CSI 300 fell more than 3 percent on speculation a cash crunch may curb loans to smaller enterprises. The CSI Smallcap 500 Index lost 2.3 percent, while the ChiNext index of start-up companies plunged 3.1 percent.
China Vanke led declines for developers, losing 1.9 percent to 7.33 yuan. Chinese property values dropped 0.25 percent from November, SouFun Holdings Ltd., the nation’s biggest real-estate website owner, said today. Prices slid in 60 of 100 cities, and all of the 10 biggest, including Beijing and Shanghai.
The government may introduce measures to boost consumption, the China Daily reported today, citing Huang Hai, a former assistant minister of commerce. A national conference will be held “around” April where government departments including the commerce ministry, National Development and Reform Commission and finance ministry will discuss “concrete” measures to lift consumption, the report cited Huang as saying.
GD Midea Holding Co., China’s second-biggest publicly traded appliance maker, climbed 1.3 percent to 12.08 yuan. Gree Electric, the largest maker of home air-conditioners, jumped 1.2 percent to 17.50 yuan, the highest close since Dec. 1.
-- Editors: Allen Wan, Richard Frost