China’s stocks fell, dragging the benchmark index down to the lowest level since March 2009, after a central bank adviser said economic growth will slow this quarter and as Europe’s crisis worsened the outlook for exports.
Jiangxi Copper Co. and China Shenhua Energy Co. led a decline among commodity producers on concern weaker growth will sap demand for raw materials. China Pacific Insurance (Group) Co., the nation’s fourth-largest insurer, dropped 2.2 percent after funds controlled by Carlyle Group LP offered to sell its Hong Kong-listed shares. Weichai Power Co., a maker of high-speed heavy-duty diesel engines, slumped the most since November 2010 after estimating a drop in second-quarter profit.
“The economy is still on a downtrend and that means corporate earnings could be worse than expected,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The government is slow to respond to the economic slowdown and the market is disappointed at the magnitude of pro-growth measures.”
The Shanghai Composite Index dropped 1.3 percent to 2,141.40 at the close, the lowest level since March 13, 2009. The CSI 300 Index slumped 1.4 percent to 2,365.43. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 0.6 percent in New York on July 20.
Thirty-day volatility in the Shanghai index was at 15.1 today, compared with this year’s average of 17.9. About 6.4 billion shares changed hands in the gauge on July 20, 23 percent lower than the daily average this year.
Slower 3Q Growth
The Shanghai Composite fell 0.8 percent last week on concern earnings will deteriorate and as the government said it won’t ease property curbs. The measure has fallen 13 percent from this year’s high on March 2 amid concern an economic slowdown is deepening. It’s valued at 9.5 times estimated profit, compared with the average of 17.5 since Bloomberg began compiling the data in 2006.
Jiangxi Copper, China’s biggest producer of the metal, lost 3.2 percent to 21.89 yuan. Shenhua, the nation’s largest coal producer, slid 1.3 percent to 21.96 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal, retreated 1.5 percent to 6.04 yuan.
China’s economic growth may cool to 7.4 percent this quarter, Song Guoqing, a member of the People’s Bank of China monetary policy committee, said at a forum in Beijing over the weekend. He also warned that a decline in producer prices in tandem with consumer inflation may hurt investment returns of industrial companies, damping their desire to expand.
“The consensus is that China’s economic growth rate will be close to 8 percent in coming months, but I personally am more pessimistic because there are problems on the export side,” Song said. With Europe’s debt crisis still unfolding, “there is a risk of insufficient government measures if Chinese exports fall more sharply than expected in coming months,” he said.
The world’s second-largest economy grew 7.6 percent in the second quarter, the least in three years. Import and export growth both slowed last month.
HSBC Holdings Plc and Markit Economics are scheduled to release their preliminary manufacturing index for this month tomorrow. The reading was at 48.2 in June, below the 50 dividing line for expansion and contraction.
In Europe, German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. Roesler, who is Germany’s economy minister, told broadcaster ARD that Greece was unlikely to be able to meet its obligations under a euro-area bailout program as its international creditors hold talks this week in Athens. Should that be the case, the country won’t receive more bailout payments, Roesler said.
Europe is China’s largest export market, making up 18 percent of the nation’s overseas sales, according to Shenyin & Wanguo Securities Co.
China Pacific dropped 2.2 percent to 22.81 yuan. Carlyle Holdings Mauritius Ltd. and Parallel Investors Holdings Ltd. are selling 220 million shares in the insurer for HK$25.5 to HK$26 ($3.35) each, according to terms for the sale obtained by Bloomberg News. The selling price represents a discount of as much as 5.2 percent to the stock’s closing price in Hong Kong on July 20. The Hong Kong shares plunged as much as 12 percent.
Weichai Power slumped 7.9 percent to 23.69 yuan. First-half profit may have declined by about the same rate in the first quarter because of China’s macro-economic policy and the slowdown, the company said in a statement on July 20 after the market closed. Net income fell 45 percent in the first quarter.
Chinese publicly traded companies are required to release first-half earnings results in July and August. Of the 885 companies in the Shanghai Composite, the 20 that reported second-quarter earnings had an average 3.3 percent profit decline, according to data compiled by Bloomberg. Profit rose 2.8 percent in the first quarter, the data showed.
The China Securities Regulatory Commission will further reduce commission charges for securities trading by as much as 20 percent, the Shanghai Securities News reported on its website on July 20, citing an unidentified CSRC official. The CSRC will announce a detailed plan by Sept. 1, it said.
Citic Securities Co., the nation’s biggest listed brokerage, tumbled 41 percent to 12.30 yuan. Citic agreed to buy Credit Agricole SA’s CLSA unit for $1.25 billion, joining banks across Asia acquiring the assets of troubled European financial firms.
Zhejiang Reclaim Construction Group Co. led gains among Chinese waterworks companies after the government allocated 120 million yuan ($18.8 million) for rainstorm relief and repairs after flooding in Beijing over the weekend.
Zhejiang Reclaim, a dam builder, jumped 6 percent to 15.62 yuan, the biggest gain since June 27. Zhejiang Dragon Pipe Manufacturing Co. surged by the 10 percent daily limit to 11.58 yuan. Ningxia Qinglong Pipes Industry Co. climbed 5.6 percent to 7.95 yuan.
The rainstorm, the heaviest since records were first kept 60 years ago, killed 37 people and caused 10 billion yuan of losses, while about 80,000 travelers were stranded after their flights were delayed, the China Daily newspaper said. Authorities evacuated 56,933 people, the official Xinhua News Agency reported.
Chinese stocks fell for a third week in New York before Internet companies from Baidu Inc. to Ctrip.com International Ltd. report second-quarter earnings that analysts estimate will show slower profit growth. The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. sank 1.9 percent last week.