China Stocks Fall Most in Month as Manufacturing Trails EstimateWeiyi Lim
China’s stocks fell, sending the benchmark index to its biggest loss in a month, as an unexpected decline in a manufacturing index heightened concern growth in the world’s second-biggest economy is decelerating.
Jiangxi Copper Co. and Aluminum Corp. of China Ltd. led declines for material producers. SAIC Motor Corp. slumped more than 5 percent to drag down automakers after the city of Tianjin said it would limit issuance of car license plates. Bank of China Ltd. dropped the most in three months after benchmark money-market rates jumped.
The Shanghai Composite Index fell 1.6 percent to 2,160.86 at the close. The measure slid for a fifth day, the longest losing streak since June. The preliminary reading of 50.5 for a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics, known as flash PMI, compares with the 50.9 median estimate in a Bloomberg News survey. The seven-day repurchase rate rose 0.14 percentage point to 4.44 percent.
“The lower-than-expected HSBC flash data will have a negative impact on the markets,” said Mao Sheng, an analyst at Huaxi Securities Co. in Chengdu. “For the rest of the year, I expect to continue to see small declines as liquidity is tight.”
The CSI 300 Index lost 1.6 percent to 2,367.92. The Hang Seng China Enterprises Index slid 0.9 percent. The Bloomberg China-US Equity Index gained 0.8 percent on Dec. 13.
The Shanghai Composite has fallen 4.8 percent this year on concern slowing economic growth will curb earnings. The gauge trades at 8.4 times projected profit for the next 12 months, compared with 10.1 for the MSCI Emerging Markets Index, according to data compiled by Bloomberg. Trading volumes in the Shanghai index were 6.5 percent below the 30-day average.
The flash PMI fell to a three-month low as output gains eased and employment weakened, suggesting the world’s second-largest economy is vulnerable to a slowdown. The preliminary reading compares with a final figure of 50.8 in November. A number above 50 indicates expansion.
“The reading confirms our view that Chinese GDP growth is already decelerating,” said Dariusz Kowalczyk, economist and strategist at Credit Agricole CIB in Hong Kong. He forecasts 7.2 percent expansion in 2014, compared with 7.7 percent this year.
The government will maintain continuity and stability in its macro-economic policies in 2014 and stick to a prudent monetary policy and proactive fiscal policy, China Central Television reported, citing a statement from the annual Central Economic Work Conference that ended Dec. 13.
China’s leaders pledged to tackle local government debt next year while creating a stable economic and social environment to promote reforms. The conference, held to map out economic policies for next year, concluded that the nation should seek “reasonable” growth in gross domestic product. Caixin reported that China set a GDP growth target of about 7.5 percent for 2014.
“Expectations are that next year’s economic growth won’t be great,” said Du Liang, an analyst from Shanxi Securities Co. “The previous positives on reforms have been priced in and the conference details released didn’t show any highlights for economic growth. Sentiment turned negative again and investors have started to sideline themselves.”
Jiangxi Copper, the nation’s biggest producer of the metal, slumped 2.2 percent to 14.59 yuan. Aluminum Corp., known as Chalco, declined 3.2 percent to 3.68 yuan. Cosco Shipping Co. led losses for shippers, plunging 6.1 percent to 3.70 yuan. China Cosco Holdings Co. retreated 2.3 percent to 3.42 yuan.
Suning Commerce Group Co. paced declines for consumer-discretionary companies, dropping 7.2 percent to 9.22 yuan. SAIC Motor slumped 5.4 percent to 14.55 yuan. Great Wall Motor Co. retreated 3.5 percent to 45.02 yuan.
Auto stocks fell amid concern city governments will impose more measures to curb pollution. Tianjin, a port city near Beijing, will issue license plates through auctions and lotteries, the state-run Xinhua News Agency reported yesterday, citing an unnamed city department familiar with the matter.
Bank of China paced a retreat for financial companies, declining 1.5 percent to 2.72 yuan. Citic Securities Co., the biggest-listed brokerage, dropped 2.1 percent to 12.45 yuan.
Money-market rates rose on increased demand for cash as the end of the year approaches. The government’s decision to end a 15-month freeze on initial public offerings may unleash at least $11 billion of share sales in next year’s first half.