China’s stocks fell, sending the benchmark index to its biggest drop in a week, on growing concern government efforts to shore up economic growth will be insufficient. Financial and commodity companies led declines.
Jiangxi Copper Co. and Aluminum Corporation of China Ltd. paced losses for metal companies, sliding at least 2 percent. Datong Coal Industry Co. slumped 4.2 percent. China Vanke Co., the nation’s biggest listed developer, dropped to the lowest level in three weeks. SAIC Motor Corp., the largest carmaker, gained 4 percent after reporting higher first-half profits.
The Shanghai Composite Index retreated 0.7 percent to 2,206.47 at the close. China is unlikely to introduce any “meaningful” stimulus even after yesterday’s disappointing credit data because the government is content with the slower pace of economic growth, according to Credit Suisse Group AG.
“The magnitude of the economic recovery has been put into doubt,” said Wu Kan, a money manager at Shanghai-based Dragon Life Insurance Co. “Stocks will come under pressure and consolidate for a couple of weeks.”
The CSI 300 Index slid 1 percent to close at 2,335.95. The Hang Seng China Enterprises Index, or H-shares gauge, lost 1.2 percent at 3:50 p.m. The Bloomberg China-US Equity Index added 1.4 percent yesterday. Trading volumes in the Shanghai index were 18 percent above the 30-day average.
Gauges of material and energy shares in the CSI 300 dropped 2 percent and 1.7 percent respectively, the biggest losses among 10 industry groups. Jiangxi Copper fell the most in almost two months, while Aluminum Corporation of China Ltd., known as Chalco, slid for a second day. Datong Coal slid the most since June 19. Yanzhou Coal Mining Co. lost 3.2 percent. China Coal Energy Co. slumped 3.2 percent in Hong Kong for the steepest loss in the H-shares gauge.
Premier Li Keqiang is grappling with sustaining economic growth while containing financial risks after shadow banking exploded in China from 2010. Aggregate financing was 273.1 billion yuan ($44.3 billion) last month, versus the 1.5 trillion yuan median estimate, while factory production rose 9 percent and fixed-asset investment growth weakened.
“We do not expect meaningful stimulus from Beijing in the current economic environment,” Credit Suisse economists Dong Tao and Weishen Deng, wrote in a report dated yesterday. “The threshold of the current administration is much higher than the Wen Jiabao regime when it comes to launching stimulus. If the much more unfriendly growth in first quarter failed to trigger social instability, we do not see why it should happen now.”
Some economists are betting yesterday’s data will spur policy makers to expand stimulus. Barclays Plc is forecasting two second-half interest-rate cuts, while Australia & New Zealand Banking Group Ltd. said a reduction in banks’ reserve requirements is imminent.
Shenzhen-based Vanke, the biggest-listed developer, slumped 2 percent. Shenzhen will stick to its home-purchase limits, the Shenzhen Urban Planning, Land and Resources Commission said on its microblog yesterday. Gemdale Corp. declined 1.6 percent.
SAIC added 4 percent. The automaker said yesterday net income rose 18 percent from a year earlier in the first half.
Cosco Shipping Co., a unit of China’s biggest shipping company, jumped 7.8 percent. China Shipping Development Co., a unit of the second-largest sea-cargo group, rose 3.2 percent. Maersk Supply, a unit of AP Moller-Maersk Group, has ordered vessels from China for the first time in $470 million deal, the South China Morning Post reported.
The Shanghai index has risen 11 percent since mid-March as monetary easing, accelerated government spending and gains in manufacturing spur speculation the nation will meet its 7.5 percent economic expansion target. The index is valued at 8.1 times 12-month projected earnings, compared with the five-year low of 7.3 in March, according to data compiled by Bloomberg.
The Shanghai-to-Hong Kong stock price convergence trade is spurring record inflows into exchange-traded funds that invest in mainland China.
The two biggest ETFs tracking China’s A shares lured about $2.5 billion from the end of May through yesterday, the most for any similar period since they both started trading. By contrast, the largest ETFs that buy Hong Kong-traded Chinese companies, known as H shares, posted just $5 million of inflows.
Investors are betting valuation discounts of about 8.5 percent for A shares will narrow as a link between exchanges in Shanghai and Hong Kong, scheduled to start in about two months, makes it easier for arbitragers to close gaps between dual-listed securities.