China’s Stocks Complete Longest Losing Streak Since January

  • Consumer prices projected to have quickened to 2.4% in March
  • H shares rise for first time in five days after bull market

China’s stocks dropped for a third day, the longest losing streak in two months, amid concern next week’s inflation data will make it difficult for the government to further ease monetary policy.

The Shanghai Composite Index fell 0.8 percent to close below the 3,000 level for the first time since March 29. Declines were led by consumer and industrial companies. Monday’s data are projected to show the consumer-price index climbed to 2.4 percent in March. Reports on trade, industrial production and new bank lending are also expected in the coming days. While below the government’s target, faster inflation may be enough to give it pause before lowering borrowing costs.

The Shanghai gauge has faltered in April, after posting its biggest monthly gain in almost a year in March, amid speculation the rebound can’t be sustained without an improvement in the economy and earnings. The People’s Bank of China hasn’t cut interest rates since October.

“The market is speculating that the central bank won’t have too much room for easing monetary policy given the current inflation situation,” said Wang Chen, a partner with Xufunds Investment Management Co. in Shanghai. “When stocks have a decent rally, some investors also choose to cash out,” he said, keeping his stock holdings at about 40 percent of asset allocations.

The Shanghai index fell 0.8 percent this week to 2,984.96. Trading volumes were 15 percent below the 30-day average. The CSI 300 Index retreated 0.7 percent. The Hang Seng China Enterprises Index rose 0.7 percent in Hong Kong, reversing a loss of as much as 1.4 percent. The Hang Seng Index gained 0.5 percent.

Recent reports point to stabilization in the world’s second-biggest economy, including central bank data released after the end of trading on Thursday showing an unexpected rise in foreign-exchange reserves. The headline increase in forex reserves isn’t quite as reassuring as it looks, according to Bloomberg Intelligence economists Tom Orlik and Fielding Chen. Netting out valuation effects, reserves actually fell about $20 billion in March, they said. Even so, a third month of slowing outflows suggests concern that the People’s Bank of China would lose its grip on the yuan were overdone.

Inflation Outlook

China’s inflation rate probably accelerated from the previous month’s 2.3 percent amid rising food and housing prices. The nation’s top economic planner said this week it sees faster inflation this year, while the China Securities Journal said in a front-page commentary the economic rebound faces risks including inflation expectations triggered by surging pork prices and home-purchase curbs in top cities.

Liquor maker Jiangsu Yanghe Brewery Joint-Stock Co. led declines for consumer-staples shares, dropping 2 percent. Wuliangye Yibin Co. lost 1.9 percent. Citic Heavy Industries Co. slid 4.2 percent, dragging down industrial companies. Gold producers advanced, with Shandong Gold Mining Co. and Western Region Gold Co. rising at least 4.4 percent.

An element of anxiety has returned to financial markets this week, with minutes from the Federal Reserve’s March meeting emphasizing its concern over the global outlook and International Monetary Fund chief Christine Lagarde signaling the organization is likely to lower its outlook for world growth.

— With assistance by Shidong Zhang

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