Chinese Stocks Fall for First Time in Three Days on Commodities

  • ‘Game is over’ for speculation on metals, Reorient’s Wang says
  • Steelmakers, copper producers and oil refiners lead declines

China’s stocks fell for the first time in three days, led by commodity producers, amid speculation raw-material prices will extend declines as a faltering economic rebound curbs demand.

The Shanghai Composite Index slid 0.8 percent at the close. Jiangxi Copper Co. and Angang Steel Co. dropped at least 1.2 percent, while Yanzhou Coal Mining Co. retreated the most in two weeks. The Hang Seng China Enterprises Index was little changed. Turnover slumped in Shanghai and Hong Kong.

Raw materials have been on a tumultuous ride this year after tentative signs of a demand revival in China ignited a firestorm of speculation. The frenzy led to a clampdown from regulators and exchanges, weakening prices once more, including for iron ore and steel. Chinese manufacturing gauges and trade figures have also missed predictions, while a high-profile warning by the People’s Daily about elevated levels of debt have damped hopes for more easing.

“Game is over for speculation on ferrous metals,” said Steve Wang, chief China economist at Reorient Financial Markets Ltd. in Hong Kong. “The official stance is clearly against speculation as state media and regulators seek to stabilize prices. Ferrous metal prices have made a round trip back to where their rally started in February and March.”

Frenzy Abates

The Shanghai Composite closed at 2,821.67, while the CSI 300 Index lost 0.8 percent in trading volumes that were 33 percent below the 30-day average. The Hang Seng Index added 0.1 percent as turnover fell 20 percent.

Gauges of material and telecom companies in the CSI 300 slid at least 1 percent for the steepest losses among 10 industry groups. Angang Steel Co. declined 2.1 percent, while Yanzhou Coal Mining plunged 3.1 percent.

Ore with 62 percent content sank 6.7 percent to $51.22 a dry metric ton on Monday, the lowest level since March 3, according to Metal Bulletin Ltd. After romping 23 percent higher last month as China’s ill-fated frenzy gathered pace, the price has tumbled by the same amount so far in May.

China’s benchmark equity gauge has tumbled 20 percent this year, the worst performer among 93 global indexes tracked by Bloomberg. Selling has been limited by suspected buying from state-backed funds aimed at preventing the Shanghai benchmark from ending below 2,800, according to Shanghai Bingsheng Asset Management.

Market Forces

“The A-share market remains in a downtrend as investors wait cautiously for signs of improvement in corporate earnings and macro indicators,” said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd. “The national team, which stepped in to prevent systematic risks, is gradually staying back and letting market forces play.”

Comments from Charlene Chu, a banking analyst who made her name warning of the risks from China’s credit binge, and a Xinhua News Agency commentary may reinforce concern about the economy and the lack of forthcoming stimulus.

A bailout in the trillions of dollars is needed to tackle the bad-debt burden dragging down growth, Chu said. Speaking eight days after the People’s Daily highlighted dangers from the build-up of debt, Chu, a partner at Autonomous Research, said she was yet to be convinced the government is serious about deleveraging and eliminating industry overcapacity.

Xinhua said in a commentary published on the central government’s website that China should avoid large stimulus in the property market. The government shouldn’t seek to cut stockpiles of unsold new homes by adding leverage, the news agency said.

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