Chinese Stocks Slump After Data as Yuan Falls to Four-Year Low

  • Energy producers lead equity declines after oil sinks
  • Exports fell for fifth month, imports dropped for 13th month

China Exports Fall for a Fifth Month

Chinese stocks fell the most in a week after trade data signaled a deepening slowdown in the nation’s economy and sinking crude prices dragged on oil companies. The yuan closed at its weakest level in four years.

The Shanghai Composite Index dropped 1.9 percent to 3,470.07 at the close. Energy and material producers were the worst-performing industry groups after oil plunged to the lowest level in more than six years. PICC Property & Casualty Co. tumbled the most since July in Hong Kong after American International Group Inc. sold a stake in the insurer. The Hang Seng China Enterprises Index slid for a fourth day, while the yuan dropped after the central bank cut its reference rate to the lowest since Aug. 27.

China’s exports fell for a fifth month and a slump in imports extended to a record 13 months, suggesting six interest-rate cuts and expedited fiscal spending are failing to boost growth. Inflation data on Wednesday is forecast to show producer price deflation deepened in November. The yuan weakened even after figures Monday showed the nation’s foreign-currency stockpile shrank to $3.44 trillion as the central bank sold dollars to prop up the currency.

“Overall, today’s data underscored the continued weakness we are seeing in global trade,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “The overnight plunge in oil prices warranted greater attention. Much of the sell-off this morning was attributed to weakness in the energy and material sectors.”

The CSI 300 Index retreated 1.8 percent. The Hang Seng China Enterprises index fell 1.4 percent, dragged down by insurers, while the Hang Seng Index slipped 1.3 percent.

Trade Data

China’s exports dropped 3.7 percent in November in yuan terms, while imports slid 5.6 percent, the customs administration said. The decline in overseas shipment was bigger than the 3.6 percent slide in October. The trade surplus narrowed to 343.1 billion yuan ($53.5 billion) in November from the previous month’s 393.2 billion yuan.

"The fall in exports is suggesting the situation is rather serious,” Qian Qimin, an analyst at Shenwan Hongyuan Group Co., said by phone. “Coupled with tighter liquidity conditions toward the year-end and new share offerings in the near term to divert liquidity, the market is in a weak state and will likely consolidate around 3,400 points for a while."

About 3.1 trillion yuan will be locked up on Dec. 14 when nine companies begin new share subscriptions on the same day, China International Capital Corp. analysts led by Hanfeng Wang wrote in a note on Monday. The 10 companies in total that are selling new shares will raise an estimated 4.4 billion yuan, CICC analysts wrote.

Yuan Weakens

Gauges of energy and material shares in the CSI 300 slid at least 2.7 percent, the steepest declines among 10 industry groups. PetroChina Co. lost 2 percent, while Yanzhou Coal Mining Co. declined 3.4 percent. West Texas Intermediate for January delivery sank 5.8 percent to $37.65 a barrel in New York, the lowest close since February 2009. Yunnan Copper Co. plunged 3.6 percent.

The yuan weakened 0.1 percent to 6.4172, the weakest close since August 2011, in Shanghai. China’s forex reserves declined last month as the central bank sold dollars to prop up the local currency ahead of approval from the International Monetary Fund for the yuan to be included in its basket of reserve currencies. The currency hoard dropped by $87.2 billion from October’s $3.53 trillion, according to People’s Bank of China data, extending this year’s decline to $405 billion.

“They are losing foreign reserve, that means capital outflow from China,” said Jackson Wong, associate director at Huarong International Securities Ltd. “The main reason still can’t be figured out but from the economic perspective China is not doing well. That means some funds might pull out from China to the U.S. or Europe.”

Margin traders reduced holdings of shares purchased with borrowed money for a fourth day on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange falling to 688.6 billion yuan.

In Hong Kong, PICC tumbled 5.8 percent after AIG raised more than $750 million by selling shares in China’s largest non-life insurer. China Pacific Insurance Group Co. declined 2.7 percent.

— With assistance by Amanda Wang, and Kyoungwha Kim

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