Photographer: Johannes Eisele/AFP via Getty Images

China Stocks Cap Longest Weekly Losing Streak in Two Years

  • H-share index falls 10% from April high, poised for correction
  • Investors wary before industrial output data, strategist says

Chinese stocks fell for a fourth week, capping the longest string of losses in two years, as metal prices dropped and the yuan weakened amid concern the government will hold off from new stimulus even as growth falters.

The Shanghai Composite Index slid 3 percent this week, led by energy and material companies. The Hang Seng China Enterprises Index dropped 10 percent from the April high, entering a so-called correction. Data on new loans and aggregate financing released after the market close trailed analyst estimates. Reports on industrial production and retail sales are scheduled for Saturday. The yuan weakened to the lowest level in two months in Hong Kong.

China’s benchmark stock gauge has slumped 20 percent this year, making it the worst performer among 95 global benchmark indexes tracked by Bloomberg. The most recent data have showed March’s pick up in economic indicators didn’t carry over to April, with manufacturing gauges and trade figures missing predictions, while a high-profile warning by the People’s Daily about the nation’s high levels of debt have damped hopes for more easing.

“Investors are looking for Chinese data that will be announced over the weekend to see if the economic rebound in March can continue into April,” said Daniel So, a strategist at CMB International Securities Ltd. in Hong Kong.

Stimulus Fades

The Shanghai gauge slipped 0.3 percent to 2,827.11 at Friday’s close. The CSI 300 Index fell 0.5 percent. The Hang Seng China index dropped 1.3 percent in Hong Kong, while the Hang Seng Index lost 1 percent.

After the close, the People’s Bank of China released data showing new lending fell to 555.6 billion yuan ($85.2 billion) in April from 1.37 trillion yuan in the previous month, missing the 800 billion median estimate of a Bloomberg survey. Aggregate financing was 751 billion yuan, compared with the 1.3 trillion yuan estimate.

China should abandon the idea of loosening money conditions to accelerate economic growth, the People’s Daily report said Monday, citing an interview with an “authoritative” person who wasn’t identified. Data the following day showed consumer prices rose for a third month, increasing speculation faster inflation may cut the odds for more monetary easing.

Gauges of material and energy stocks in the CSI 300 were the worst performers this week, with declines of at least 4 percent. Yanzhou Coal Mining Co. plunged 11 percent. Shenzhen Zhongjin Lingnan Nonfemet Co. slid 8.9 percent, while Zhongjin Gold Corp. retreated 5.6 percent. Copper fell 1.4 percent on Thursday in New York. Gold lost 0.3 percent, poised for a 1.8 percent loss this week.

Weekend Data

Industrial output is forecast to rise 6.5 percent in April from a year earlier, according to a Bloomberg survey of economists. That would be a pullback from March’s sharp post-Chinese-new-year-holiday bounce, though stronger than most 2015 readings. Retail sales are seen increasing 10.6 percent and fixed-asset investment is seen climbing 11 percent in the January-April period, according to Bloomberg surveys. 

The SGX AsiaClear contract for June settlement in Singapore sank as much as 3.5 percent to the lowest intraday level since March 4. It plunged 12 percent this week, the most since December. In Dalian, iron ore futures tumbled on Friday to the lowest since February as steel in Shanghai headed for the biggest weekly loss on record.

Financial companies led declines in Hong Kong, with China Merchants Bank Co. and Huatai Securities Co. slumping at least 4.1 percent.

Yuan Weakens

Chow Tai Fook Jewellery Group Ltd. fell 3.4 percent in Hong Kong, heading for the lowest close in a month. The world’s largest jewelry retailer said full-year profit plunged as much as 50 percent as weak Chinese consumer demand undercut revenue and it posted hedging losses on gold loans.

The yuan dropped 0.1 percent against the dollar on Friday in Hong Kong to the lowest since March 2.

"The market is getting pessimistic about the yuan, as recent data suggest that the economy slowed in April and the dollar resumed strength," said Banny Lam, Hong Kong-based co-head of research at Agricultural Bank of China International Securities.

— With assistance by Shidong Zhang, and Kana Nishizawa

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