China’s Stocks Post Longest Weekly Losing Streak in Four Years

  • Industrial, consumer-staples shares lead declines in Shanghai
  • Industrial profit growth slows to 4.2% in April from 11.1%

China's Stock Market Goes Quiet

China’s stocks capped their longest stretch of weekly losses since July 2012 amid concern a pick-up in earnings growth is losing steam as the nation’s economy slows.

The Shanghai Composite Index fell for a sixth week after slipping 0.1 percent by Friday’s close. Industrial, drug and consumer-staples producers were the worst performers this week. China Southern Airlines Co. and Air China Ltd. slumped more than 5 percent during the period, hurt by rising fuel prices and a weakening yuan. Data on Friday showed industrial companies’ profit growth slowed to 4.2 percent in April.

Sentiment toward Chinese stocks turned bearish after March’s pick up in economic indicators didn’t carry over to April and a high-profile warning by the People’s Daily about the nation’s high levels of debt damped hopes for more easing. Adding to the concern this week is the prospect of higher U.S. interest rates spurring capital outflows. Despite dwindling optimism, the Shanghai Composite hasn’t strayed more than 51 points from 2,800 in the past two weeks, with declines limited by suspected buying from state-backed funds aimed at preventing the benchmark from ending below that level.

Testing Patience

“The market is slowly searching for a bottom and testing investors’ patience,” said Wu Kan, a fund manager at JK Life Insurance in Shanghai. “Stocks are fluctuating in a small range near 2,800 amid waning turnover, as investors cautiously await clarity over issues such as the timing of U.S. rate hikes.”

The Shanghai Composite fell 0.2 percent this week to 2,821.05. The index has dropped 4 percent this month, extending this year’s slide to 20 percent for the worst performance among 93 global indexes tracked by Bloomberg.

Industrial companies’ profit growth slowed from 11.1 percent in March. For the Jan.-April period, profits rose 6.5 percent from the previous year, the National Bureau of Statistics said on its website.

“Growth of industrial profits decelerated in year-over-year terms, on the back of lower sales growth, investment return and non-business income,” Goldman Sachs Group Inc. economists led by Maggie Wei wrote in a report. “These three factors supported the strong rebound in March industrial profits and were reversed in April.”

After something of a roller-coaster ride in March and April, China settled into sluggish growth in May, according to the earliest batch of private indicators tracking the world’s second-largest economy. The Minxin manufacturing index from the China Academy of New Supply-side Economics, Market News International’s business confidence indicator and Standard Chartered Plc’s small-business gauge all retreated.

Airlines Slump

The Hang Seng China Enterprises Index rose 0.8 percent at the close, boosting this week’s gain to 3.5 percent. The Hang Seng Index advanced 0.9 percent for a weekly gain of 3.7 percent. The CSI 300 Index slid 0.1 percent, extending this week’s loss to 0.5 percent.

Gauges of industrial, drug and consumer-staples companies in the CSI 300 dropped at least 0.9 percent this week. Transportation companies led declines, with Juneyao Airlines Co. sliding 13 percent. Rising fuel prices risk a profits reversal for Chinese airlines, which reported surging earnings last year. Unlike most overseas peers, they don’t hedge against big swings in fuel prices, making it easier for them to take advantage of reduced operating expenses.

In Hong Kong, Tingyi slumped 10 percent on Friday after the noodle maker reported a 46 percent plunge in first-quarter net income.

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