Hong Kong’s Bear Market Followed by Chinese ADR Declines

Chinese shares slumped in New York trading after a gauge of Hong-Kong listed companies entered a bear market amid mounting concern that growth in the world’s second-largest economy is slowing.

The Bloomberg China-US Equity Index of the most-traded stocks in the U.S. dropped 1.1 percent to 96.04 yesterday. The Hang Seng China Enterprises Index fell 1.7 percent on the day, extending its retreat from a Dec. 2 high to 20 percent. Yingli Green Energy Holding Co., the world’s largest solar-panel maker, tumbled to the lowest level since December in New York while China Mobile Ltd., the biggest phone company, sank after posting its worst profit decline since 1999.

Goldman Sachs Group Inc. cut this year’s forecast for Chinese economic growth to 7.3 percent while solar-cell maker Baoding Tianwei Baobian Electric Co. said trading in its bonds will be halted, adding to concern that bad debts are increasing. The government is targeting 7.5 percent growth this year, which would be the slowest pace since 1990.

“The trimming of forecast is not optimistic,” Tony Hann, the head of emerging-market equities at Blackfriars Asset Management Ltd. in London, said by phone yesterday. “Such moves add up to the general uncertainty among investors around China. I’m not surprised investors are leaving as they are obviously concerned.”

Growth Forecast

Goldman Sachs lowered its growth forecast for China from 7.6 percent after disappointing trade and consumption data, strategists led by Li Cui wrote in a note. Official data released in March showed the steepest slide in exports since the global financial crisis and the slowest growth in factory output for the January-to-February period since 2009, highlighting the challenges for Premier Li Keqiang in achieving his growth target.

Baoding Tianwei said its notes will be halted from trading today amid signals the Chinese government will allow more defaults in the nation’s onshore bond market as the economy slows. The solar-cell maker said the Shanghai Stock Exchange decided to halt trading of its 1.6 billion yuan ($258 million) of bonds, according to an exchange statement yesterday.

The company reported a net loss of 5.23 billion yuan in 2013 versus a 1.55 billion yuan earnings deficit a year ago and its capacity to repay its debt is in “absolute trouble,” Guotai Junan Securities Co. said in a March 13 report.

Yingli Green tumbled 6.2 percent to $5.03. Earlier this week, executives pushed back guidance for when the Baoding-based manufacturer will return to profit.

China Mobile sank 3.9 percent to $42.91 as profit declined on rising costs to build out high-speed networks and attract new users.

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., dropped 0.3 percent to $33. The Hang Seng China Enterprises Index retreated to 9,203.07, extending this year’s slide to 15 percent. The Shanghai Composite Index fell 1.4 percent to 1,993.48.

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