China Stocks Fall to Three-Week Low as Home-Price Growth SlowsWeiyi Lim
China’s stocks fell, sending the benchmark index to the lowest level in three weeks, amid concern weakness in the property market and curbs on interbank borrowing will worsen the economic slowdown.
Poly Real Estate Group Co. led Shanghai-based developers to the biggest loss among industry groups after new-home prices climbed in the fewest cities since October 2012. China Minsheng Banking Corp. slid to a two-month low as UBS AG said it was cautious on the lender’s shares after the government ordered interbank lending restrictions. Wuliangye Yibin Co. fell 2.5 percent after the China Securities Journal said the company had cut the price of some liquor products by more than 30 percent.
The Shanghai Composite Index dropped 1.1 percent to 2,005.18 at the close, the lowest since April 28, after briefly dropping below the 2,000 level. The property data add to concerns the economic slowdown is deepening after reports last week showed unexpected decelerations in industrial-output and investment growth, according to Zheshang Securities Co.
“Home prices released over the weekend weren’t good and it has created investor expectations that home prices will continue falling,” Zhang Yanbing, an analyst at Zheshang Securities, said by phone from Hangzhou. “The government’s curbs on interbank borrowing will weigh on property companies too. After last week’s economic data, it simply shows the economy isn’t recovering.”
The Hang Seng China Enterprises Index declined 0.7 percent at 3:25 p.m. The CSI 300 Index slid 1.4 percent at the close. The ChiNext index gained 0.2 percent, halting a two-day slump that helped send the gauge into a bear market on May 16. The Shanghai Composite’s trading volumes were 30 percent below the 30-day average, according to data compiled by Bloomberg.
The Shanghai index dropped below the 2,000 level an hour before the close before paring losses. It has rallied from levels near 2,000 at least twice this year as policy makers took steps to reduce money-market rates and speed-up infrastructure spending.
Chinese authorities seem to have “anchored” 2,000 as its bottom line for the market, according to Hao Hong, China equity strategist at Bocom International Holdings Co.
A gauge of real-estate companies in the Shanghai index fell 1.5 percent today, the most among five industry groups. Poly Real Estate, the second-largest developer, dropped 0.9 percent. Shanghai New Huangpu Real Estate Co. plunged 2.3 percent. Anhui Conch Cement Co., the biggest producer of the building material, slumped 3.2 percent in Hong Kong.
Home-price growth moderated both in first-tier and less affluent cities. Prices in Beijing rose 0.1 percent from March, the National Bureau of Statistics said in a statement on May 18, the slowest since September 2012, while Shanghai prices increased 0.3 percent, the smallest gain since November 2012.
“China’s property market is on a very dangerous brink,” Xu Gao, Beijing-based chief economist at Everbright Securities Co., who formerly worked at the World Bank, said in a phone interview yesterday. “Concerns about the slowing market led to weakening prices and sales, which turned into a vicious circle.’
The Chinese government ordered lenders to curb interbank borrowing in the latest effort to check growth in the informal shadow-banking industry that threatens to undermine the nation’s financial system.
A commercial bank should limit its interbank borrowing to less than a third of its liabilities, while its lending to another financial firm shouldn’t exceed 50 percent of its Tier 1 capital, according to a statement on the People’s Bank of China’s website on May 16. Financial institutions need to better manage the maturity of interbank funding and control liquidity risks, the PBOC said.
China Minsheng fell 3.4 percent in Shanghai and lost 1.7 percent in Hong Kong. Industrial Bank Co. retreated 2.8 percent. The PBOC’s new interbank rules may lead to near-term turbulence, UBS analysts led by Irene Huang wrote in a note. Besides Minsheng, the analysts said they were cautious on shares of Bank of Chongqing Co. and Chongqing Rural Commercial Bank. The new rules may reduce annual earnings of mid-sized Chinese banks, Morgan Stanley analysts led by Richard Xu wrote in a note.
Wuliangye, the biggest maker of baijiu liquor after Kweichow Moutai Co., slid 2.5 percent. The China Securities Journal said the company cut the retail price of a key product by 34 percent. Kweichow Moutai dropped 4.6 percent.
The Shanghai measure has lost 5.2 percent this year on concern the growth slowdown will curb earnings and the potential resumption of initial public offerings will divert funds. The regulator hasn’t approved any listing of IPO shares since January.