China Stocks Fall to 6-Month Low as Imports Miss Forecast

Most Chinese Stocks Fall After Trade Report; Poly Real Declines
Employees work on the trading floor of the Shanghai Stock Exchange in Shanghai, China. Photographer: Kevin Lee/Bloomberg

China’s stocks fell, dragging the benchmark index down to a six-month low, after a government report showed imports rose less than anticipated in June while export growth slowed.

Shenzhen Chiwan Wharf Holdings Ltd. led a decline for port operators as a gauge of export orders showed a contraction for the first time since January, suggesting that overseas shipments may slow in coming months. Poly Real Estate Group Co., the nation’s second-biggest developer, slumped 3.7 percent after forecasting lower first-half profit. PetroChina Co. rose the most in two months on speculation the energy producer’s shares are undervalued after plunging yesterday to a record low.

“Trade data are pretty weak,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Worries about the strength of the economy will weigh on the market and drive stocks down.”

The Shanghai Composite Index slipped 6.4 points, or 0.3 percent, to 2,164.44 at the close, the lowest since Jan. 6. The CSI 300 Index sank 0.4 percent to 2,406.71. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, slid 1.7 percent yesterday.

The Shanghai index has fallen 1.6 percent this year, reversing a gain of as much as 12 percent, on concern the government isn’t doing enough to stem the slowdown. It trades at 9.6 times estimated profit, compared with the 17.6 average since Bloomberg began compiling the data in 2006.

Trade Data

Thirty-day volatility in the Shanghai Composite was at 15.62 today, compared with this year’s average of 18.13. About 7.5 billion shares changed hands in the index yesterday, 12 percent lower than the daily average this year.

China’s inbound shipments increased 6.3 percent from a year earlier, the customs bureau said in a statement today in Beijing, compared with the 11 percent median estimate in a Bloomberg News survey of 32 economists. Overseas sales gained 11.3 percent. The trade surplus rose to a three-year high of $31.7 billion.

“There’s something bad for everyone in this,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore, who previously worked at the World Bank. “On the import side the news is just bad,” with evidence of weak investment spending, which “reinforces hard-landing worries.”

Shenzhen Chiwan slumped 4.8 percent to 9.84 yuan. Shanghai International Port (Group) Co., the operator of the world’s second-busiest harbor, slipped 0.4 percent to 2.69 yuan.

A gauge of property stocks in the Shanghai Composite dropped 2.1 percent, the most among five industry groups. Poly Real Estate dropped for the first time in eight days, losing 3.6 percent to 12.53 yuan. Gemdale Corp., the fourth-biggest developer by market value, slumped 1.6 percent to 6.84 yuan.

Deflation Risk

China’s housing ministry plans to hold local governments more accountable for easing property market curbs, the 21st Century Business Herald reported today, citing an unidentified person close to the ministry. The government should tighten home purchase restrictions and ask local authorities to implement curbs more strictly, the newspaper cited Yang Hongxu, deputy head of E-House China R&D Institute, as saying.

Stocks tumbled yesterday after a drop in producer prices fueled concern deflation may spread to other parts of the economy and Premier Wen Jiabao said the economy faces “relatively large” downward pressure.

ZTE Drops

Government data showing the consumer price index rose 2.2 percent in June, the slowest pace in more than two years, follows the second interest-rate cut in a month last week. A statistics bureau report on July 13 is expected to show China’s economy expanded 7.7 percent in the second quarter, the slowest pace in three years, according to the median estimate of 35 economists surveyed by Bloomberg.

Slowing June consumer prices and the possibility that July CPI growth may be less than 2 percent provides greater room for policy fine-tuning, the People’s Daily reported, citing Ba Shusong, a researcher at Development Research Center of the State Council.

ZTE Corp., China’s second-largest maker of telecom equipment, slid to the lowest since March 2009, losing 5.5 percent to 13.05 yuan in Shenzhen. China is said to plan retaliation if the European Union investigates government subsidies to ZTE and Huawei Technologies Co., the Financial Times reported yesterday, citing a person briefed on the meeting. Both companies have denied receiving any improper subsidies, the FT reported.

Airlines Climb

“ZTE has sales exposure in the EU,” Leping Huang, analyst at Nomura International Hong Kong Ltd., said in a telephone interview. “All major stakeholders including Ericsson and Nokia don’t want the EU to go through with this. No one benefits.”

In Europe, the yield on Spain’s 10-year bond rose above the 7 percent threshold that prompted bailouts in Greece, Ireland and Portugal as regional finance ministers gathered in Brussels to work out crisis measures. Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

PetroChina rebounded 1.1 percent to 8.96 yuan after falling to a record low yesterday on concern cuts in energy prices will hurt earnings. China, the world’s second-biggest oil consumer, will reduce gasoline and diesel prices for the third time since May after global crude costs tumbled.

“Investors are taking this opportunity to buy up the stock, hence the rebound,” said Li Xin, an analyst at Masterlink in Shanghai. The stock trades at 11.5 times estimated price earnings, compared with the five-year average of 17.1 and the record low of 10.89, according to data compiled by Bloomberg.

China Eastern Airlines Co. led gains for airlines on the prospect lower fuel prices will boost earnings. Shares of the second-biggest domestic carrier climbed 2.6 percent to 4.35 yuan. Air China Ltd., the largest international airline, rose 2.4 percent to 6.35 yuan.

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