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China’s Stocks Retreat Most in Month on Economic Target

Shanghai Waigaoqiao Free Trade Zone
A Chinese national flag is reflected in a sign for the China (Shanghai) Pilot Free Trade Zone in the Waigaoqiao free trade zone and logistics park in Shanghai. Shanghai Waigaoqiao Free Trade Zone Development Co. plunged 3.9 percent, paring this year’s rally to 274 percent. Photographer: Tomohiro Ohsumi/Bloomberg

China’s stocks fell, dragging the benchmark index to its biggest loss in a month, as coal producers retreated and investors speculated the government may cut growth targets at an economic policy meeting this week.

China Shenhua Energy Co. and China Coal Energy Co., the nation’s biggest coal producers, dropped at least 2 percent as worsening air pollution spurred government plans to curb coal consumption. China Life Insurance Co. tumbled 3.9 percent, reducing gains in the past month to 14 percent, while Ping An Insurance Group Co. retreated 3.4 percent.

The Shanghai Composite Index dropped 1.5 percent to 2,204.17 at the close, the biggest loss since Nov. 13. The Hang Seng China Enterprises Index sank 2.8 percent in Hong Kong. China’s government may cut its 2014 economic growth target to 7 percent from 7.5 percent at the conference which ends tomorrow, the Economic Information Daily reported Dec. 4. Policy makers should phase out proactive fiscal stimulus, the China Securities Journal said in a front page commentary today.

“There’s concern that the government will set a lower economic growth target,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “That’s triggered a sell-off of big-cap cyclical stocks, which have dominated the broader market recently.”

The CSI 300 slumped 1.7 percent to 2,412.76. The Bloomberg China-US Equity Index added 0.6 percent in New York yesterday. Trading volumes in the Shanghai Composite were equal to the 30-day average today, according to data compiled by Bloomberg.

Growth Target

The People’s Bank of China will announce new loans for November and money supply figures as early as today. Data released yesterday by the statistics bureau showed that industrial output rose less than estimated in November while retail sales unexpectedly accelerated.

The government will likely maintain its targets of 7.5 percent for growth and 3.5 percent for inflation next year, Barclays Plc economist Jian Chang wrote in a report dated yesterday. Keeping the targets should help to stabilize market sentiment as the government implements reforms, according to report. The Economic Information Daily reported Dec. 4 that China may set its 2014 growth target lower at 7 percent.

The Shanghai Composite has risen 3.2 percent since the government vowed on Nov. 15 to allow more private investment in state-controlled industries and loosen its one-child policy in the most sweeping reforms in two decades. The gauge trades at 8.6 times projected profit for the next 12 months, compared with the seven-year average of 15.2, according to data compiled by Bloomberg.

Coal Stocks

Shenhua lost 2 percent to 16.49 yuan. China Coal fell 2.5 percent to 5.18 yuan. Yanzhou Coal Mining Co. sank 1.9 percent to 9.82 yuan.

China will have regional coal consumption control plans for some key areas, Xie Zhenhua, vice chairman of National Development and Reform Commission,said at a meeting yesterday. His comments were made in statement posted on the NDRC’s website. The plans are among efforts to curb air pollution next year, the statement said.

Shanghai, China’s commercial hub, has had record smog this month, prompting flight cancellations and warnings to children and the elderly to stay indoors. The city was experiencing “light pollution” levels this morning, according to its environmental monitoring center.

Shanghai’s pollution hurts the city’s image as it seeks to attract foreign businesses to its fledgling free-trade zone, Robert Theleen, chief executive officer of ChinaVest Ltd. and chairman of the American Chamber of Commerce in Shanghai, said in a Dec. 9 interview.

Trade Zone

A measure of financial stocks slipped 2.1 percent, the second-biggest loss among the CSI 300’s 10 industry groups.

China Life, the nation’s biggest insurer, lost 3.9 percent to 15.66 yuan. Ping An, the second largest, dropped 3.4 percent to 41.73 yuan.

Citic Securities Co., China’s biggest listed brokerage, slid 3.4 percent to 15.68 yuan. Haitong Securities Co., the second largest, fell 3.8 percent to 11.43 yuan.

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