Chinese ADRs Drop in U.S. as IMF Cites Slowdown Contagion Risk

  • IMF Says China's slowdown fallout may be bigger than expected
  • Online retailer leads drop on Bloomberg China ADR gauge

Chinese stocks trading in New York fell for the first time in three days after the International Monetary Fund highlighted China’s growth slowdown as a drag on global expansion, adding to concerns about the performance of the world’s second-largest economy.

The Bloomberg China-U.S. Equity Index fell 0.3 percent to 105.58 in New York on Tuesday. Online retailer Inc. contributed the most to the decline, dropping 3.7 percent. Melco Crown Entertainment Ltd., a Macau casino operator, rose 1.9 percent, rallying for a third day amid investor optimism that the company will benefit from targeted government stimulus measures.

While the IMF on Tuesday left its outlook for China’s growth this year at 6.8 percent and 6.3 percent for next year, it said “cross-border repercussions” of slowing Chinese growth “appear greater than previously envisaged.” The Chinese government has tried to bolster the weakest expansion in gross domestic product in 25 years with five interest-rate cuts since November and a currency devaluation in August.

“It is hard to envision any swift turn around of the Chinese economy,” Xian Liang, a San Antonio, Texas-based portfolio manager at U.S. Global Investors Inc., said in an e-mail. “It is possible that we get a reprieve after all the gyrations in the third quarter. But fundamentals typically do not change overnight, especially when big-bang policy stimulus seems increasingly unlikely to happen.”

ETF Falls

China’s official purchasing managers index last week showed it hovered near a three-year low of 49.8 in September, the same level as August. Readings below 50 indicate a contraction.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, which invests in mainland-traded shares, fell 0.8 percent to $33.59, ending a five-day advance. The mainland market is shut until Oct. 8 for a holiday.

The Chinese government may lower its economic growth target to 6.5 percent in 2016 from 7 percent this year, Yang Zhao, the chief China economist at Nomura Holdings Inc. said on Tuesday. The nation’s growth will slow to 6.8 percent this year, according to the median of economist estimates compiled by Bloomberg.

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