China’s Stocks Extend Bear Market Slump as Minsheng Bank Falls
China’s stocks fell, deepening their slump into a bear market amid concerns elevated money-market rates will worsen the country’s economic slowdown.
China Minsheng Banking Corp. sank to the lowest level since January, pacing declines by financial shares. Gree Electric Appliances Inc. led consumer stocks lower. Telecommunications stocks rallied as ZTE Corp. climbed 3.2 percent.
The Shanghai Composite Index (SHCOMP) lost 1 percent to 1,942.99 as of 10:14 a.m. local time, while the CSI 300 declined 1.5 percent to 2,171.21. The gauges had their biggest slumps yesterday since August 2009 after the central bank signaled it will maintain efforts to curb speculative lending. The CSI 300 has fallen 23 percent from this year’s closing high on Feb. 6, while the Shanghai Composite is down 20 percent.
“We are likely to see a technical rebound after the market slumped so much in such a short period of time,” Li Jun, a strategist at Central China Securities Co. in Shanghai, said by phone today. “Valuations are low and that’s appealing to short-term speculators. But the overall trend remains downward as the financial system is still in a money crunch that may hurt economic growth.”
Losses have accelerated this month after preliminary manufacturing data showed a contraction and on concern surging money-market rates will deepen the slowdown. The overnight repurchase rate of 6.65 percent yesterday was more than double this year’s average. It reached 30 percent on June 20, the highest intraday level in at least a decade, data compiled by Bloomberg show.
China shouldn’t ease liquidity to rescue the stock market, the People’s Daily reported today. It would be hurt if the central bank eased liquidity or regulators continue a suspension of initial public offerings, according to a commentary published on the newspaper written by Gao Yuncai, who wasn’t identified.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong gained 0.2 percent after retreating 3.2 percent yesterday. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 2.7 percent in New York.
The Shanghai Composite is valued at 7.99 times projected 12-month earnings, the lowest since Bloomberg began to compile the data since 2006. The 14-day relative strength measure for the index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 15.9 yesterday. Some investors use readings below 30 as a signal to buy.
The number of Shanghai Composite stocks with RSI readings below 30 reached 586 yesterday, the highest level since Dec. 15, 2011, data compiled by Bloomberg showed. The index had 266 members trading at new 52-week lows, the most since Dec. 4, according to the data.
The tumble in Chinese stocks is set to continue as tight credit deepens the nation’s economic slowdown, according to Bank Julius Baer & Co. and Societe Generale SA. The CSI 300’s average bear-market retreat is 36 percent and the mean duration is 241 days, data compiled by Bloomberg show.
Money market rates that have more than doubled in the past six weeks will weigh on China’s indebted developers and manufacturers, said David Poh, who helps oversee $113 billion as the regional head of portfolio-management solutions at Societe Generale’s private bank. While the CSI 300 is valued at a record low versus the MSCI All-Country World Index, shares will only rally once the cash crunch subsides, said Kelvin Wong, an analyst at Julius Baer, which manages $290 billion.
Goldman Sachs Group Inc. and China International Capital Corp. yesterday joined banks from Barclays Plc to HSBC Holdings Plc in paring their growth projections this year to 7.4 percent, below the government’s 7.5 percent goal.
Trading volumes in the Shanghai Composite were 22 percent higher than the 30-day average while 30-day volatility was at 22.6, according to data compiled by Bloomberg. The volatility gauge reached 23 yesterday, the highest level since April 2.
--Zhang Shidong. Editors: Darren Boey, Richard Frost
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