China Stocks Fall as Consumer Shares Drop Before Economic Data

China’s stocks fell for the first time this week, led by consumer-discretionary companies, before tomorrow’s economic data including industrial production.

Chongqing Changan Automobile Co., the Chinese partner of Ford Motor Co. and Mazda Motor Corp., and Suning Commerce Group Co., the largest electronics retailer, dropped at least 1.8 percent. Ningbo Marine Co. and Yingkou Port Liability Co. both jumped 10 percent after the government pledged to spend more on developing the Yangtze River region.

The Shanghai Composite Index fell 0.2 percent to 2,051.71 at the close. China yesterday announced new steps aimed at bolstering slowing economic growth by cutting taxes and expanding financing for exporters. The initiatives came after falling imports last month underlined the weakness in domestic demand that is making the economy more reliant on exports.

“The data to be released tomorrow won’t surprise on the upside and may even show some weakness,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “However, the government will keep rolling out pro-growth measures to help cushion the slowdown.”

The CSI 300 Index declined 0.3 percent to 2,153.41. The Hang Seng China Enterprises Index slid 0.8 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 0.2 percent yesterday.

The Shanghai Composite has dropped 3 percent this year on concern the slowing economy will hurt earnings and new share offerings will divert funds.

Economic Data

The nation’s statistics bureau is due to release May data on industrial production, retail sales and investment tomorrow. Factory output probably expanded 8.8 percent, compared with 8.7 percent growth in April, according to the median estimate in a Bloomberg survey.

A measure of consumer-discretionary stocks dropped 0.7 percent, the most among the 10 industry groups in the CSI 300.

Changan Auto fell 2.3 percent while Suning Commerce lost 1.8 percent. Qingdao Haier Co., China’s biggest refrigerator maker, retreated 1.7 percent.

The Shanghai Composite is valued at 7.6 times 12-month projected earnings, compared with the five-year average multiple of 11.7, according to data compiled by Bloomberg. Trading volumes in the index were 9.8 percent above the 30-day average today.

Ningbo Marine jumped to the highest since April 23 while Yingkou Port rose to the highest since April 2010.

Growth Measures

China will boost public investment in railways, roads, airports and waterways in the Yangtze River basin and cut some utility companies’ taxes by a total of about 24 billion yuan ($3.9 billion) a year, the State Council said in a statement after a meeting yesterday at which Premier Li Keqiang presided.

The People’s Bank of China said in a separate statement yesterday that it will encourage banks to lend more to exporters to boost shipments. It reiterated plans to promote development of direct trading between the yuan and other currencies. The central bank earlier in the week said it will reduce reserve requirements for some banks by 0.5 percentage point effective June 16.

China may continue to use targeted reserve-ratio cuts and may increase the frequency of re-lending as the central bank is less likely to cut interest rates in the near future, according to a front-page commentary in the China Securities Journal.

— With assistance by Shidong Zhang

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