China Stocks Fall as President Xi Sees Downside Economic Risks

  • Home prices are latest data to show slowing Chinese economy
  • Industrial and technology companies lead declines in Shanghai

China’s stocks fell for a second day after President Xi Jinping said the world’s second-biggest economy was facing “considerable downward pressure.”

The Shanghai Composite Index slid 1percent to 3,568.47 at the close, led by industrial and technology companies. Data on Wednesday showed China’s home-price recovery slowed in October, adding to a slew of reports including manufacturing and exports that show the government may struggle to achieve its 7 percent growth target for this year. CRRC Corp., China’s biggest maker of railway equipment, declined 1.7 percent. Wangsu Science & Technology Co. slumped 3.6 percent, paring this year’s rally to 172 percent.

“There’s no spotlight in the economy now as the new growth engine has yet to emerge,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai. “The rebound in the broader market has already reached a critical level and it may take more time to digest some profit taking and to consolidate here.”

The Shanghai index has risen 22 percent from the August low, spurred by monetary easing including six interest-rate cuts within a year and a rebound in margin debt. The measure trades at 13.8 times estimated earnings for the next 12 months, compared with 11 for the MSCI Emerging Markets Index.

Property Slowdown

New-home prices increased in 27 cities, 12 fewer than in September, the National Bureau of Statistics said. Prices dropped in 33 cities, compared with 21 in September. The data follow recent reports showing falling exports, tame inflation, slowing industrial output, and a rare bright spot in the form of increased retail spending. The readings underscore the government’s challenge to kick-start growth in an economy weighed by overcapacity and debt.

m/m change

Bloomberg Data

China is working to overcome the challenges of slowing global growth this year by advancing reforms and won’t change its policy on foreign investment, Xi said at the Asia-Pacific Economic Cooperation chief executives summit in Manila.

Trading volumes in the Shanghai Composite were 11 percent lower than 30-day average on Wednesday. The CSI 300 Index lost 1.1 percent. The Hang Seng China Enterprises Index in Hong Kong fell 0.2 percent, while the Hang Seng Index lost 0.3 percent.

Citic Gains

Technology and industrial stocks were the biggest decliners among 10 industry groups in the CSI 300 with losses of at least 1.6 percent. Glodon Software Co. slid 4.9 percent, while China Avionics Systems Co. retreated 5.3 percent for the biggest loss since Oct. 28. Technology companies remain the best performers this year among industry groups, gaining 46 percent.

Citic Securities Co., the nation’s biggest listed brokerage, gained 2.9 percent. Chairman Wang Dongming, 64, is retiring because of his age and will continue as chairman until the next board election, while Citic Group Corp.’s Zhang Youjun will be added to the board, the company said in a Tuesday exchange statement.

The changes are part of the shake-up that will subject Citic Securities to tighter control from its state-owned parent, according to people familiar with the matter. The authorities have been discussing the need to punish Citic Securities for its role in the summer stock rout, according to the people. President Cheng Boming is among seven company executives named by the state-run Xinhua News Agency as being under investigation.

China will expand the trading quota and the number of eligible shares for the Shanghai-Hong Kong stock link, according to the nation’s securities regulator. The China Securities Regulatory Commission will also promote a planned link with Shenzhen, Vice Chairman Fang Xinghai said in comments posted on the body’s website. 

Margin traders increased holdings of shares purchased with borrowed money for a second day on Tuesday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising to 719.2 billion yuan ($112.8 billion).

— With assistance by Shidong Zhang

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