China's Shares Slump Most in Two Months as Commodity Prices Sink

  • Hang Seng China gauge records longest losing streak this year
  • Steel rebar futures plunge most this week since at least 2009

Chinese stocks fell the most in two months as tumbling commodity prices weighed on raw-material producers and concern grew that a pickup in economic indicators is faltering.

The Shanghai Composite Index slid 2.8 percent at the close, erasing gains for the week, as Shaanxi Coal Industry Co. and Hainan Mining Co. led a decline among energy and metals stocks. This comes just as a frenzy that had gripped Chinese commodity markets begins to abate, with October contracts for steel reinforcement bars slumping a record 9.5 percent this week. The Hang Seng China Enterprises Index fell for a fifth day, the longest run of losses this year.

The declines reflect pessimism on the economy, with a range of data coming in lower than forecast. Both private and official manufacturing gauges released in the past week missed predictions, while figures due Sunday are estimated to show that export growth was unchanged in April after a surprise 11.5 percent jump in March. The nation’s foreign-exchange reserves likely declined, according to a Bloomberg survey, in an indication of renewed capital outflows.

“Commodity resource stocks like coal and steel are suffering bigger losses,” said Ben Kwong, a director at brokerage KGI Asia Ltd. in Hong Kong. “Investors are going back to fundamentals rather than speculation, so we expect the correction to continue. The market seems to be looking for an excuse to correct."

Volumes Climb

The Shanghai Composite closed at 2,913.25, while the Hang Seng China gauge retreated 1.8 percent in Hong Kong. Trading volumes in Shanghai were 8.7 percent above the 30-day average. The Hang Seng Index slid 1.7 percent at the close, taking a weekly decline to 4.5 percent, the most since the period through Feb. 12.

Shaanxi Coal lost 6.4 percent, paring its rebound from a Feb. 1. low to 29 percent, while Wuhan Iron & Steel Co. slid 4.6 percent to a one-month low. A measure of developers in Shanghai retreated 2.1 percent, following three days of gains. China Enterprise Co. slid 5 percent, among the biggest declines in the gauge. The ChiNext index for smaller companies slid 4.3 percent.

Commodity Decline

All industry groups fell on the CSI 300 index, with Tsingtao Brewery Co. slumping to pace declines in a measure of consumer-staple stocks. Commodity companies were among the biggest losers among Chinese shares in Hong Kong as well, with the market taking a hit also from the offshore yuan’s biggest weekly loss since March.

China Longyuan Power Group Co. and PetroChina Co. declined at least 1.8 percent, while Citic Securities Co. retreated 3.1 percent. FIH Mobile Ltd. slumped 21 percent, the most since October 2008, after the company said it expects six-month profit to sink as much as 92 percent.

“There are greater selling pressures as the Shanghai Composite moves closer to the 3,000 level,” said Yen Chiu, a sales trader at China Securities International Financial Holding Co. in Hong Kong. “It’s more of a change in sentiment ahead of a slew of economic data and weekend rather than concrete speculation or news affecting the market.”

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