Chinese equities traded in the U.S. fell the most in two weeks after the government pared the nation’s economic growth target for the first time since 2005.
China Life Insurance Co., the nation’s largest life insurer, fell the most in almost three months, leading a 2 percent slide in the Bloomberg China-US 55 index of the most-traded Chinese stocks in the U.S. Commodity producers Yanzhou Coal Mining Co. and Aluminum Corp. of China Ltd. also tumbled as metal prices sank and coal stagnated.
Chinese Premier Wen Jiabao cut the economic growth target for this year to 7.5 percent from the 8 percent level in place since 2005 in an address to a National People’s Congress meeting today, saying the nation needs to shift to a more sustainable economic model. China may “appropriately” widen the fixed trading band for the yuan as it gradually reduces the trade surplus, the official Xinhua News Agency reported, citing the People’s Bank of China Governor Zhou Xiaochuan.
A lower growth target “is an indicator of a soft landing,” said Michael A. Gayed, chief investment strategist in New York at Pension Partners LLC, which advises on over $150 million in assets and invests in Chinese stocks through exchange-traded funds. “There has been this concern that you’ll have a substantial decline in China’s growth rate.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., sank 2.9 percent, the most since Feb. 10, to $39.09 by 11:26 a.m. in New York. The Bloomberg China-US 55 index slid to 106.45, headed for its lowest close since Feb. 10.
‘Slower Growth’ Reality
By showing that it expects slower economic expansion, “the central government is sending a signal to local governments that this year is not all about growth and that the external situation is a bit worse so that we have to accept as a reality of slightly slower growth,” Wang Tao, a China economist at UBS AG, said in an interview with Bloomberg Television today.
Beijing-based China Life’s American depositary receipts dropped 5.8 percent to $43.99, the biggest intraday slump since Dec. 12. The ADRs, each representing 15 common shares, traded 1 percent below the stock in Hong Kong, which declined 4.4 percent to HK$23, the equivalent of $2.96 per share.
Yanzhou Coal retreated 4.5 percent to $23.39 in New York, poised for the lowest close since January 13. ADRs of China Aluminum, known as Chalco and also based in Beijing, dropped 4 percent to $13.05.
Copper slipped the most in two weeks in New York and nickel, zinc, lead and aluminum all declined in London trading. Chinese benchmark thermal coal at Qinhuangdao port was unchanged from a week earlier at 760 yuan ($121) to 770 yuan a metric ton as of yesterday, according to data from the China Coal Transport and Distribution Association. Prices declined over the past three weeks.