Stocks Fall in China, Cap Biggest Monthly Loss Since August; Vanke Drops
China’s stocks fell, sending the benchmark index to its biggest monthly decline since August, on concern the European debt crisis is worsening and the government will step up measures to curb property speculation.
Baoshan Iron & Steel Co. and Jiangxi Copper Co. slid more than 2 percent after an official said steel export growth will be “hard to sustain” and Fitch Ratings downgraded Spain’s credit rating. China Vanke Co. and Poly Real Estate Group Co. paced declines by developers after the China Securities Journal said Shanghai has submitted a real-estate levy proposal to the government for review.
“Europe and a possible property tax have put the domestic economy at risk of a slowdown,” said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 63.62, or 2.4 percent, to close at 2,592.15. The gauge slumped 9.7 percent in May, extending April’s 7.7 percent loss, as policy makers took steps to cool the real estate market and concern grew that Europe’s debt problems will derail a global recovery. The CSI 300 Index fell 2.7 percent to 2,773.26 today.
Fitch cut Spain’s credit rating one step to AA+ from AAA as the country struggles to cut debt amid a fiscal crisis that prompted the European Union to forge an almost $1 trillion loan package for its weakest economies. Spain’s debt burden is likely to weigh on growth, Fitch said. Europe is China’s biggest export destination, making up 20 percent of its total overseas sales.
Jiangxi Copper, China’s biggest producer of the metal, dropped 4.3 percent to 28.77 yuan. Zhuzhou Smelter Group Co., China’s biggest producer of refined zinc, slid 2.7 percent to 10.68 yuan.
“Spain could be the start of a chain effect in Europe and the possibility of more severe consequences can’t be ruled out,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.
Baoshan Steel, the listed unit of China’s second-biggest steelmaker, fell 2 percent to 6.35 yuan.
Strong growth in steel exports from China, the largest producer, will be “hard to sustain,” as the global market is oversupplied, said an official from the China Iron & Steel Association.
“China’s steel production faces a predicament after a fairly good start in the first four months,” Luo Bingsheng, vice chairman of the association said over the weekend at a conference in Shanghai. “Production costs will continue to rise, while the sales prices of steel products have been falling since mid-April.”
Vanke, the nation’s biggest listed property developer, slid 3 percent to 7.21 yuan. Poly Real Estate, the second-largest, dropped 3.4 percent to 11.05 yuan. Gemdale Corp., the fourth- largest, retreated 4.3 percent to 6.44 yuan.
Shanghai may impose a property tax on people without residence permits and those who do not file income tax declarations for three years or more, the China Securities Journal said, citing unidentified people.
Separately, the State Council approved the National Development and Reform Commission’s gradual property tax reform as part of a plan announced last month, according to a government statement today.
The Shanghai Composite has dropped 21 percent this year as the central bank raised bank reserve requirements three times to avert asset bubbles. The gauge entered a so-called bear market this month after declining more than 20 percent from the November peak, and is the only index in Asia among the 10 worst performers worldwide, according to data compiled by Bloomberg.
Economic data due for release tomorrow may show China’s manufacturing grew at a slower pace this month. The Purchasing Managers’ Index fell to 54.5 in May from 55.7 a monthly earlier, according to a Bloomberg survey.
The May PMI is likely to moderate from April, while food prices suggest a further rise in inflation to around 3 percent in May, Barclays Plc said in a note to clients dated May 28.
A “correction” in Chinese stocks that has made them Asia’s worst performers this year may be nearing its end given the duration and degree of the slump, according to Elliott Wave International Inc.
The current leg of declines in the Shanghai Composite has lasted 40 weeks, similar to an earlier stretch of gains, while the declines have amounted to almost half the magnitude of the previous rally, Elliott Wave said.
Agricultural Bank of China may cut the share price of its initial public offering to no lower than 1.6 times their book value from 1.8 times, Caing.com said on its website, citing unidentified people close to the deal.
Sichuan Road & Bridge Co. jumped 9.7 percent to 9.54 yuan on a government plan to develop China’s western region. Chongqing Road & Bridge Co. added 0.9 percent to 11.11 yuan. Qinghai Huading Industrial Co., a manufacturer of heavy machine, climbed 2.9 percent to 7.90 yuan.
China will boost development of its western regions by providing favorable policies on finance and taxation, the official Xinhua News Agency reported, citing President Hu Jintao.
The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.
Bank of China Ltd. (601988 CH), the nation’s third-largest lender by market value, rose 2 percent to 4.09 yuan after saying it plans to raise 40 billion yuan selling convertible bonds to replenish capital.
China Animal Husbandry Industry Co. (600195 CH) jumped 7.2 percent to 26.83 yuan, the biggest gain since Nov. 2. The company’s earnings forecast for this year was raised 41 percent to 0.99 yuan a share by Shenyin & Wanguo Securities Co. analyst Zhao Jinhou, who said in a today’s report revenue from sales vaccines for foot-and-mouth disease will increase “by a large margin.”