Most Chinese Stocks Fall on Jump in Money Rates, Growth Concern

Most Chinese stocks fell on concern a jump in money-market rates will make it costly for small companies to borrow and as a state economist said the government will set the lowest growth target in eight years.

Five stocks declined for every three than gained on the benchmark Shanghai Composite Index, which added 0.3 point, or less than 0.1 percent, to 2,357.18 at the close. For the week, the index climbed 0.2 percent, a fifth week of gains and the longest winning streak since November 2010. The Shanghai gauge has rebounded 9.7 percent from a Jan. 5 low on speculation the central bank will cut reserve-requirement ratios to spur growth.

Yanzhou Coal Mining Co. led a slump for coal producers after economist Fan Jianping said Premier Wen Jiabao may announce a 7 percent or 7.5 percent target for economic growth this year. China Life Insurance Co., the biggest insurer, gained 1.8 percent after premium income rose 12 percent in January.

“The process of policy easing is much slower than expected and market liquidity isn’t ample to push the market up further,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “Investors are waiting for what the government will do next and for upcoming economic data that may support their view that the economy is bottoming.”

The CSI 300 Index added 1 point to 2,537.09 today, and was up 0.1 percent for the week. The People’s Bank of China announced a reduction in reserve ratios on Nov. 30, the first since 2008, after boosting them and interest rates last year to cool inflation. M2, the broadest measure of money supply, expanded 12.4 percent in January from a year earlier, the lowest in more than a decade.

Lower Growth

China may set a lower annual growth target at the annual National People’s Congress meetings in March as authorities place less emphasis on the pace of expansion and the global economy remains weak, Fan, the head of the Economic Forecasting Department at the center which is controlled by China’s top economic planning agency, said in an interview yesterday.

Yanzhou Coal paced declines for coal producers on concern slowing economic growth will reduce demand for energy. The stock lost 1.2 percent to 25 yuan, while Shanxi Lu’an Environmental Energy Development Co. dropped 0.9 percent to 24.13 yuan.

Fan said he doesn’t expect the central bank to lower the reserve requirement ratio for commercial lenders in the first quarter. A cut in interest rates is “not very likely” this year because real deposit rates continue to be negative, he said.

‘Mother’ of All Bubbles

The seven-day repurchase rate, a gauge of funding availability in the financial system, increased 94 basis points, or 0.94 percentage point, to 5.31 percent as of 3:28 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That’s the highest level since Jan. 19.

“We are very concerned” about China’s economy, Peter Chiappinelli, a portfolio strategist for asset allocation at Boston-based Grantham, Mayo, Van Otterloo & Co., said at the Bloomberg Link Portfolio Manager Mash-Up Conference in New York.

China’s housing market is experiencing the “mother” of all bubbles, and a property slump will hurt everything from Australian mining firms to Europe’s luxury-goods makers, said Chiappinelli.

An index tracking housing developers in the Shanghai Composite fell 1.1 percent this week, the most among the five industry groups. Gemdale Corp. declined 0.8 percent to 5.30 yuan today and slumped 4.7 percent this week, the biggest drop among property stocks.

The real-estate gauge slumped 18 percent last year as the government limited mortgages and restricted home purchases to rein in home prices that increased in the previous two years. The cooling market helped slow gross domestic product growth in 2011 to 9.2 percent, matching the smallest expansion since 2002.

Property Curbs

China will “unwaveringly” maintain property curbs in both the long and short term, the Economic Information Daily quoted Qin Hong, head of the policy research center under the Ministry of Housing and Urban-Rural Development, as saying.

Local governments will face “relatively large” fiscal pressure this year because of public housing investment and debt repayments, according to Qin.

China Life rose 1.8 percent to 18.59 yuan after it said last month’s premium income increased to 49.1 billion yuan ($7.8 billion) from 43.9 billion yuan a year ago.

Tourism Stocks

China International Travel Service Corp. led gains for tourism companies, rising 1.6 percentt o 26.71 yuan, after the government said it would increase financial support for the industry.

China will encourage local government financial support for the tourism industry, the listing of industry companies and support the merger of listed firms, the People’s Bank of China said in a statement yesterday. It will also help improve payment and settlement services for the industry, it said.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose to a one-week high as China Mobile Ltd. and Cnooc Ltd. jumped on speculation of more monetary easing.

China may cut banks’ reserve requirements three more times in the first half, after the central bank said this week it is targeting greater growth in money supply in 2012, HSBC Holdings Plc economists said in a report e-mailed yesterday.

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