China’s Stocks Head for Fourth Monthly Loss as Earnings Falter
China’s stocks fell, dragging the benchmark index down for a fourth straight month, after companies from China Cosco Holdings Co. (601919) to China Shipping Container Lines Co. reported first-half losses.
China Cosco, the world’s largest operator of dry-bulk ships, and China Shipping Container, the country’s second- largest carrier of sea-cargo boxes, dropped to their lowest levels since they listed in 2007. Steelmaker Beijing Shougang Co. sank 3.4 percent after forecasting a loss for the first nine months. Sinolink Securities Co. (600109) paced gains by brokerages after the Shanghai Securities News said regulators expanded margin financing today.
“There’s no sign of the economy or corporate earnings picking up,” said Dai Ming, a fund manager at Hengsheng Hongding Asset Management Co. in Shanghai, which manages $190 million. “Stock valuations are pretty low and that may attract bargain hunters betting on technical rebounds or government policy loosening.”
The Shanghai Composite Index (SHCOMP) slipped less than 0.1 percent to 2,052.59, its lowest close since February 2009, as almost three stocks dropped for each that rose. The gauge has dropped 2.4 percent this month. The CSI 300 Index (SHSZ300) declined 0.2 percent to 2,211.37 today, while the Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong sank 1.5 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, fell 0.7 percent in New York yesterday.
Signs that China’s economic slowdown is deepening have dragged the Shanghai Composite down 7.8 percent this quarter, the worst performer after Cyprus among 93 global stock benchmark index tracked by Bloomberg. The gauge is down 6.7 percent for the year and 2.4 percent in August.
China Cosco dropped 1.2 percent to 3.98 yuan. The company said its loss widened to 4.87 billion yuan ($767 million) in the first six months from 2.76 billion yuan a year earlier as a global capacity glut sapped shipping rates.
China Shipping Container slid 2.3 percent to 2.13 yuan after doubling its first-half loss from a year earlier to 1.28 billion yuan.
Beijing Shougang tumbled 3.4 percent to 2.85 yuan. The steelmaker said it expects a net loss of between 320 million yuan and 420 million yuan in the nine months to September.
Fifty-seven percent of companies in the Shanghai Composite missed analysts’ estimates for quarterly profit, while 41 percent beat projections, according to data on 221 earnings reports compiled by Bloomberg.
Sinolink Securities jumped 10 percent to 11.87 yuan. Citic Securities Co. (600030), China’s biggest listed brokerage, advanced 1.7 percent to 10.34 yuan. Haitong Securities Co., the second largest, added 2.7 percent to 8.29 yuan.
China Securities Finance Co. allowed 11 brokerages to borrow money and lend to investors for margin financing today, the Shanghai Securities News reported. The move may bring about 10 billion yuan of new capital into the stock market today, the China Securities Journal reported separately.
CSR Corp. (601766), the nation’s biggest train maker, rose 1 percent to 4.06 yuan after its parent bought 471,000 shares in the company yesterday.
Publicly traded companies, especially those whose stock prices are below their book values, have an obligation to buy back their own shares, the China Securities Journal reported Aug. 2, citing an unidentified official at the China Securities Regulatory Commission.
Ping An Insurance (Group) Co. (601318), the nation’s second-biggest insurer, doesn’t plan to raise its holdings in equities because the economy has yet to bottom, the Shanghai Securities News reported today, cited Chief Investment Officer Timothy Chan.
China’s gross domestic product expanded 7.6 percent last quarter, the slowest pace in three years, as Europe’s debt crisis hurt exports and Premier Wen Jiabao’s campaign to cool consumer and property prices damped domestic demand. Bank of America Corp. estimates a further slowdown to 7.4 percent in the three months through September.
The People’s Bank of China cut interest rates in June and July for the first time since 2008 and has lowered banks’ reserve requirements three times starting in November.
Declines on the Shanghai gauge have dragged valuations to 9.3 times estimated earnings, compared with an average multiple of 17.1 for the past five years, according to data compiled by Bloomberg.
China’s stocks are cheap and may get cheaper depending on policy moves, Jonathan Lowe, managing director and senior portfolio manager of JPMorgan Asset Management Ltd. said in an interview yesterday. China is a liquidity- and policy-driven market and government policy actions have been relatively disappointing so far, he said.
New bank loans may increase from July in the next several months as the government boosts investment in infrastructure projects, according to a report from Industrial & Commercial Bank of China Ltd. published in the Shanghai Securities News today.
The National Bureau of Statistics and China Federation of Logistics and Purchasing are due to release a manufacturing index for this month on Sept. 1. The Purchasing Managers’ Index may fall to 50 from 50.1 in July, according to the median estimate of 24 economists by Bloomberg. Fifty marks the dividing line between expansion and contraction.
Further Downside Risk
Thirty-day volatility in the Shanghai Composite was at 12.2 today, compared with this year’s average of 17.2. About 6 billion shares changed hands in the gauge today, 23 percent lower than the daily average this year.
Chinese equities fell in New York, driving the benchmark index to the lowest level in three weeks. The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slid 0.3 percent to $33.50 yesterday.
“There’s further downside risk for Chinese equities,” Michael Ding, lead portfolio manager of the China Regional Fund at U.S. Global Investors, which oversees about $2 billion, said in a phone interview from San Antonio.
--Zhang Shidong. Editors: Richard Frost, Darren Boey
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