China’s Stocks Fall for Sixth Day, Worst Streak in Year

China’s stocks fell for a sixth day, sending the benchmark index to its longest losing streak in a year, as money-market rates jumped before a three-day holiday next week. Financial and phone companies led declines.

Chengdu Dr Peng Telecom & Media Group Co. slumped by the 10 percent daily limit, sending a measure of telecom companies to the biggest loss among industry groups. Phone stocks are the second-best performer this year. Industrial Bank Co. dropped to an almost two-month low, while China Vanke Co., the nation’s biggest developer, slid 2.9 percent. China’s overnight money-market rate climbed to a 16-month high on speculation cash supply will tighten as banks hoard funds.

The Shanghai Composite Index fell 1.3 percent to 2,242.11 at the close, capping a 3.5 percent loss since May 29. The index has slid over the past week on concern about the outlook for economic growth and amid uncertainty when regulators will resume initial public offerings. China is due to release trade, inflation and industrial output data this weekend.

“The market is cautious before the release of economic data and investors are on the sidelines in case that the data may miss estimates,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The market is consolidating as economic growth is weak and uncertainty over when IPOs will resume is lingering.”

Economic Data

The CSI 300 Index declined 1.3 percent to 2,527.84, the lowest level since May 15, while the Hang Seng China Enterprises Index fell 1 percent. The ChiNext index lost 1 percent after Shenyin & Wanguo Securities Co. said it may slump a further 10 percent. China’s financial markets will be shut from June 10 to June 12 for the Dragon Boat Festival, which marks the death of ancient scholar Qu Yuan. The Bloomberg China-US 55 Index slid 1.5 percent in New York yesterday.

Trading volumes in the Shanghai index were 19 percent lower than the 30-day average today, while 30-day volatility was at 13.8, the lowest since Dec. 4, according to data compiled by Bloomberg. It trades at 9.2 times 12-month estimated earnings, compared with the seven-year average of 15.5 times, data showed.

The index has fallen 7.9 percent from this year’s high set on Feb. 6. The securities regulator may begin approving initial public offerings again as early as mid-August, the 21st Century Business Herald reported May 29, citing an unidentified person close to regulator. IPOs have been suspended since October as investor appetite for new stock waned amid equity-market declines.

Surging Repo

The customs administration will release May trade data on June 8. Exports may have grown 7.1 percent from a year earlier, less than half April’s reported 14.7 percent, based on the median estimate of 34 economists. Import growth probably slowed to 6.9 percent from the previous month’s 16.8 percent, a Bloomberg survey showed. A day later, the statistics bureau will release May industrial output, retail sales, and inflation data.

A measure of telecom stocks in the CSI 300 retreated 3 percent, the biggest loss among the 10 industry groups. Even with today’s loss, the index remains up 26 percent.

Chengdu Dr Peng tumbled 10 percent to 11.66 yuan. ZTE Corp., China’s second-biggest phone-equipment maker, lost 1.3 percent to 12.51 yuan.

A gauge of developers in the Shanghai index fell 2.7 percent, the most since April 23. Vanke, the biggest developer, slumped 2.9 percent to 11.49 yuan. Poly Real Estate Group Co., the second largest, lost 3.2 percent to 11.76 yuan.

Industrial Bank, part-owned by a unit of HSBC Holdings Plc, slid 3 percent to 17.34 yuan, the lowest close since April 18. Ping An Bank Co. dropped 3.3 percent to 20.13 yuan.

Small Companies

The one-day repurchase rate, which measures interbank funding availability, climbed as much as 144 basis points to 6.18 percent in Shanghai.

“Liquidity is very tight before the holidays,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “Banks are busy borrowing money.”

The ChiNext index of small companies may fall a further 10 percent from current levels because of valuations and concern they may miss earnings estimates, according to Shenyin & Wanguo Securities. It had lost 5.2 percent through yesterday from this year’s high set on May 27.

“Stretched valuations and overly high expectations about the new economy and the short-term success of the economic transformation are the reasons for the correction in the ChiNext,” Wang Sheng, an analyst at the brokerage, wrote in a report dated today. “Expectations about tight liquidity and lower-than-estimated earnings are catalysts for the decline.”

Recent data show small companies may be struggling. The official Purchasing Managers’ Index for smaller companies slid in May, even as the broader gauge rose, while a PMI index from HSBC Holdings Plc and Markit Economics that includes small enterprises fell more than forecast to an eight-month low.

TCL Corp., China’s biggest consumer-electronics maker, added 0.8 percent to 2.61 yuan. Chairman Li Dongsheng increased his stake in the company. Zoomlion Heavy Industry Science and Technology Co., the second-largets maker of construction equipment, gained 4.1 percent to 7.16 yuan after executives bought 19.4 million shares from May 30 to June 4.

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