China’s stocks fell the most in three weeks after JPMorgan Chase & Co. cut its growth outlook for the nation’s economy and concern grew the government is introducing more property restrictions to limit gains in housing prices.
China Vanke Co. led declines for developers after the 21st Century Business Herald reported Beijing tightened rules for the pre-sale of homes. Air China Ltd. slid 2.6 percent after Credit Suisse Group AG said Chinese airline traffic growth slowed last month. ZTE Corp. slumped 4.8 percent after the Wall Street Journal reported the European Union will seek to start a probe into alleged unfair trade practices by the telecom company.
The Shanghai Composite Index fell 1.1 percent to 2,217.01 at the close, the most since April 23. The CSI 300 Index dropped 1.5 percent to 2,493.34. The Hang Seng China Enterprises Index slid 1 percent. The Bloomberg China-US Equity Index lost 1.4 percent yesterday after data showed April industrial output growth trailed estimates and retail sales slowed.
“The macro data hasn’t been good, so there’s not much to drive up stocks,” said Cao Xuefeng, an analyst at Huaxi Securities Co. in Chengdu. “Support for Shanghai Composite could be at 2,150 for the rest of May.”
The Shanghai Composite has dropped 8.9 percent from this year’s high on Feb. 6 amid concern a slowing economy will curb profit growth. China’s industrial output in April rose 9.3 percent from a year earlier, compared with the 9.4 percent median estimate in a Bloomberg News survey of 38 analysts and an 8.9 percent increase in March.
JPMorgan reduced its second-quarter growth forecast for the Chinese economy to 7.8 percent from 8 percent and the full-year estimate to 7.6 percent from 7.8 percent. It cited weak domestic demand suggested by the April data including industrial output and fixed-asset investment, according to an e-mailed report.
There’s no indication the government’s policy stance will be shifted quickly to support near-term growth, the JPMorgan report said. China can’t cut interest rates because of abundant global liquidity, the China Securities Journal reported today, citing Zhu Baoliang, head of the State Information Center’s economic forecast department. Adjustments to the economy should be made through fiscal policies, the report cited Zhu as saying.
“Yesterday’s industrial production was disappointing and investors were unable to breach 2,250 level successfully, so it’s starting to look bad today,” said Du Liang, an analyst at Shanxi Securities Co. “Investors are still digesting the macro data.”
Foreign direct investment data for April may be released as early as today. FDI probably rose 6.2 percent in April from a year earlier, compared with a 5.7 percent gain in March, according to the median estimate of eight economists surveyed by Bloomberg.
The Shanghai index trades at 9.6 times estimated earnings, compared with the three-year average of 11.9 and the MSCI Emerging Markets Index’s current multiple of 11, data compiled by Bloomberg show. Trading volumes on the Shanghai index were 4.4 percent lower than the 30-day average, according to data compiled by Bloomberg.
China Vanke, the biggest developer, slid 2.6 percent to 11.32 yuan, the biggest drop since April 25. Poly Real Estate Group Co., the second largest, tumbled 3 percent to 11.59 yuan. Beijing home pre-sales will need approvals from the mayor’s office and the housing bureau, according to 21st Century Business Herald. Pre-sale prices won’t be allowed to be higher than current housing prices in the same area, the report said.
Air China, the biggest international carrier, fell 2.6 percent to 5.34 yuan. China Southern Airlines Co., the largest domestic carrier, retreated 1.7 percent to 3.39 yuan. Industry traffic growth slowed to a “disappointing” 9 percent in April from 15 percent in the previous month, Credit Suisse analysts led by Davin Wu wrote in a note dated yesterday.
ZTE, China’s second-biggest maker of mobile-phone equipment, slumped 4.8 percent to 12.88 yuan. The EU’s trade chief Karel De Gucht will ask for backing this week from the bloc’s executive arm to start investigations into alleged unfair trade practices by ZTE and Huawei Technologies Co., the Wall Street Journal reported, citing an unidentified EU official.
Jiangxi Copper Co., the biggest producer of the metal, dropped 2 percent to 20.44 yuan after its Hong Kong-listed stock was cut to neutral from outperform at Macquarie Group Ltd. The Hong Kong shares fell 2 percent to HK$15.70. Bright Dairy & Food Co. slid 2.5 percent to 14.48 yuan, paring its gains this year to 47 percent, as its New Zealand unit prepares for an initial public offering in that country.
The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., sank 1.8 percent to $37.73 in New York yesterday, the steepest decline in three weeks.