Bloomberg News

China Stocks Decline to 14-Month Low on Concern Economy to Slow

September 29, 2011

Sept. 29 (Bloomberg) -- China’s stocks fell, sending the benchmark index to a 14-month low, on concern economic growth will slow as the government maintains measures to curb inflation and demand for exports falters in Europe and the U.S.

Jiangxi Copper Co. and Aluminum Corp. of China Ltd. paced declines by commodity producers after metal prices dropped. Shanghai Friendship Group Co. and Dashang Group Co. retreated more than 2 percent among consumer-related stocks after Vice Premier Li Keqiang said the top priority will continue to be stabilizing prices. Most global investors predict Chinese growth will slow to less than 5 percent by 2016, a Bloomberg poll showed.

“The European debt problem will remain hanging over the market as there’s no possibility of solving it in the near future,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “That’ll continue to bring turmoil to global financial markets as the appetite for risk assets is falling.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 26.72 points, or 1.1 percent, to 2,365.34, its lowest close since July 5, 2010. The CSI 300 Index declined 0.9 percent to 2,588.19.

Trading in Hong Kong for the morning session was canceled because of a typhoon. China’s markets will be closed all next week for holidays.

Greek Concern

The Shanghai Composite has sunk 14 percent this quarter, set for the biggest loss since the three months to June 2010, amid concern Greece will default on its debt. The index has tumbled 16 percent this year as the government raised interest rates and reserve-requirement ratios for banks to cool inflation that’s at the highest level in almost three years.

The stock measure is valued at 10.9 times estimated profit, the lowest level on record, according to weekly data compiled by Bloomberg.

The European Commission is resisting a push to impose bigger writedowns on bank holdings of Greek sovereign debt than those previously agreed on, a European official said.

A gauge tracking materials producers on the CSI 300 retreated 2.8 percent, the largest contributor to losses among the 10 industry groups. Jiangxi Copper, China’s biggest producer of the metal, slid 2.7 percent to 26.46 yuan. Tongling Nonferrous Metals Group Co., China’s second-largest copper producer, lost 2.5 percent to 19.43 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the lightweight metal and also called Chalco, fell 1.5 percent to 8.11 yuan.

Metals, Oil

An index tracking six metals including copper, aluminum and zinc slumped 3.2 percent yesterday. Crude for November delivery dropped as much as $1.35 to $79.86 in New York Exchange today after falling 3.8 percent to $81.21 yesterday.

Fifty-nine percent of respondents to Bloomberg’s poll said China’s gross domestic product, which rose 9.5 percent last quarter, will gain less than 5 percent annually by 2016. Twelve percent see such a slowdown within a year, and 47 percent said it will occur in two to five years, the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers showed.

The global economic situation is ‘complicated’’ and challenging, and the country is seeking a stable and relatively fast economic development, China Central Television reported yesterday, citing Vice Premier Li. The government’s top priority will continue to be stabilizing prices, it said.

Shanghai Friendship lost 2.8 percent to 15.59 yuan. Dashang Group slid 2.6 percent to 41.12 yuan. Bright Dairy & Food Co., the country’s second-largest listed dairy-product maker, fell 4.2 percent to 8.18 yuan.

Power Transfer

China, which saw its exports tumble the most since at least 1979 amid the 2008-2009 global crisis, may not be able to rely on trade in any prolonged demand slump in Europe and the U.S., now battling to avoid returning to a recession. Managing the economic downshift would fall to the Communist Party’s next leaders, as President Hu Jintao and Premier Wen Jiabao begin their transition from power late next year.

Even so, for many investors, the short-term view remains positive. Asked to identify the market offering the best returns over the next 12 months, 23 percent selected China, second only to the 30 percent who picked the U.S.

Sinohydro Group Ltd. raised 13.5 billion yuan ($2.1 billion) in its initial public offering, China’s biggest this year, after selling shares at the low end of their indicative price range as the market slumped.

The country’s largest builder of hydroelectric dams sold the shares at the bottom of a price range of 4.50 yuan to 4.80 yuan, according to a statement filed to the Shanghai Stock Exchange today. The company cut the size of its issuance to 3 billion shares on Sept. 26.

--Zhang Shidong. Editor: Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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