China’s Stocks Slump on Europe Debt Crisis, Property Curbs
China’s stocks fell, driving down the benchmark index by the most in almost two weeks, on concerns Greece’s debt crisis may spread to bigger economies in Europe and the Chinese government is intensifying property curbs.
Jiangxi Copper Co. and China Shenhua Energy Co., the nation’s biggest producers of copper and coal, slumped more than 1 percent on speculation demand for commodities will falter. Poly Real Estate Group Co. retreated the most in a week after Xinhua News Agency reported Shanghai will start a trial to cap prices of newly built residential properties in some areas.
“The European debt crisis seems to be spreading and that will undoubtedly shatter confidence in global financial markets,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slid 25.7 points, or 0.9 percent, to 2,777.04 at 9:42 a.m. local time. The CSI 300 Index (SHSZ300) fell 1 percent to 3,083.02, led by energy and financial stocks.
The Standard & Poor’s 500 Index slumped 1.8 percent yesterday as concern grew Europe’s debt crisis will spread.
Euro-area countries may have to double their bailout fund to 1.5 trillion euros to cover a crisis in Italy, the European Central Bank said, according to German newspaper Die Welt, citing unidentified “high-ranking” people at central banks.
German Finance Minister Wolfgang Schaeuble said “there’s no discussion whatsoever” of doubling the European Union’s rescue facility after the Die Welt report. The Financial Times cited unidentified senior officials as saying European leaders are prepared to accept that Greece should default on some of its bonds. The EU is China’s biggest export market, accounting for about a fifth of the Asian nation’s overseas shipments.
Crude oil for August delivery fell 1.1 percent to $95.15 a barrel in New York yesterday, the lowest level since July 1. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 1.6 percent, the biggest drop since June 2.
Jiangxi Copper, China’s biggest producer of the metal, fell 1.7 percent to 35.34 yuan. China Shenhua, the nation’s largest coal producer, lost 1.7 percent to 30.37 yuan.
The Shanghai gauge has fallen 1.1 percent this year after the central bank raised interest rates five times and reserve- requirement ratio 12 times since the start of 2010 to tame inflation that quickened to a three-year high last month. The index has pared a loss of as much as 6.7 percent on speculation fiscal policies such as spending in affordable housing will support the economy and after Premier Wen Jiabao said on June 24 efforts to stem inflation have worked.
“Inflation is still a big problem in China now and the government won’t ease tightening until inflationary pressure really recedes,” said Wu.
Chinese inflation is being driven by property price increases, which will be key to controlling consumer prices, Yi Xianrong, a researcher at the Chinese Academy of Social Sciences, wrote in a commentary in the Hong Kong Economic Times today.
Shanghai will start a trial to cap prices of newly built residential properties in planned urban areas in Pudong New District in the second half of this year, Xinhua reported yesterday, citing the city’s Mayor Han Zheng.
Poly Real Estate, China’s second-largest developer by market value, dropped 2.6 percent to 10.95 yuan. China Vanke Co., the nation’s biggest listed property developer, slid 1.8 percent to 8.60 yuan.
China’s economy probably grew 9.3 percent in the second quarter, according to the median estimate in a Bloomberg survey. It expanded 9.7 percent in the first quarter. The figure and other June data including industrial production and retail sales are due tomorrow.
The State Council may discuss China’s economic development direction for the second half during a regular meeting tomorrow, the National Business Daily reported today, without saying where it got the information.
The country’s top leaders may also meet at the Beidaihe seaside resort area near Beijing in late July to set the tone for measures during the second half, the report said.
West China Cement Ltd. tumbled by a record 13 percent after Moody’s said the cement producer faced the biggest risk on governance or accounting standards of 61 Chinese companies it analyzed.
--Zhang Shidong. Editors: Allen Wan, Darren Boey
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