Chinese Stocks Drop on Growth Concern as Banks, Developers Fall

China’s stocks fell for the first time in four days, led by financial and industrial companies, as growth in services industries slowed and investors speculated initial public offerings will resume this quarter.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, lost 2 percent and developer Gemdale Corp. sank 3.1 percent. Sany Heavy Industry Co., the largest machinery maker, slid to the lowest level in three years as oil surged in New York. The non-manufacturing purchasing managers’ index fell to 53.9 in June, an official report showed, while Credit Suisse Group AG said regulators may allow share sales by October.

The Shanghai Composite Index retreated 0.6 percent to 1,994.27 at the close, paring earlier losses and halting a three-day, 2.9 percent rally. The CSI 300 Index declined 0.8 percent to 2,203.83, while the Hang Seng China Enterprises Index sank 3.3 percent, taking its loss this year to 22 percent. The ChiNext index of small-cap companies climbed 2 percent.

“Leading indicators like PMI suggest the economy is still weak,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Uncertainty over when IPOs will be resumed also weighs on sentiment. The earlier rebound isn’t sustainable.”

The slowdown in service industries underscores Premier Li Keqiang’s challenge in achieving sustainable growth across the world’s second-biggest economy through increasing consumption and reducing reliance on exports and investment. Service industries accounted for 45 percent of gross domestic product last year, according to the statistics bureau, up from 41 percent in 2003.

PMI Gauges

The official non-manufacturing PMI from the National Bureau of Statistics and the China Federation of Logistics and Purchasing fell from 54.3 in May to the second-lowest reading since March 2011, when Bloomberg started tracking the data. Another service PMI released today by HSBC Holdings Plc and Markit Economics rose to 51.3 last month from 51.2 in May. A reading above 50 indicates expansion.

A gauge tracking financial stocks in the CSI 300 declined 1.7 percent, the most among the 10 industry groups. ICBC slid to 3.94 yuan. Ping An Bank Co. lost 2.8 percent to 9.33 yuan. Gemdale retreated to 6.65 yuan. New China Life Insurance Co. sank 5.7 percent to 23.01 yuan.

Citic Securities Co. lost 2.2 percent to 9.97 yuan. Credit Suisse analysts led by Frances Feng cut the brokerage’s 2013 earnings by 12 percent in a report and reduced their target price for the Hong Kong-traded shares.

IPOs have been suspended since October as investor appetite for new stock waned amid equity-market declines.

Overnight Rates

The Shanghai Composite has tumbled 18 percent from its recent peak on Feb. 6 as data from industrial production to exports pointed to a sustained slowdown in the economy. Stocks also fell as overnight money-market rates rose to record highs.

The overnight rate dropped for a ninth day today, the longest run of declines since March. The one-day repurchase rate, which measures interbank funding availability, fell 24 basis points to 3.47 percent, according to a weighted average compiled by the National Interbank Funding Center. The rate reached a record 13.91 percent on June 20.

The Shanghai index trades at 8.2 times 12-month projected profit after falling to 7.99 on June 24, the cheapest level in at least five years, data show.

Oil Surge

Gauges of industrial companies and material producers dropped at least 1.1 percent. Sany Heavy dropped to 7.06 yuan. Jiangxi Copper, the nation’s biggest producer of the metal, declined 1.3 percent to 15.77 yuan.

Crude oil rallied above $100 a barrel for the first time in nine months on political turmoil in Egypt and shrinking U.S. stockpiles. West Texas Intermediate Crude climbed 1.4 percent to $100.95 a barrel.

PetroChina Co., the state oil producer, rose 2.2 percent to 8.02 yuan, completing a five-day, 9.7 percent rally since reaching a record low on June 26. The stock is still down 11 percent this year.

Leshi Internet Information & Technology Co. led gains on the ChiNext of Shenzhen-listed companies. Leshi Internet, a Beijing-based online video company, jumped 10 percent to 31.93 yuan, taking its gain this year to more than 200 percent.