Bloomberg News

China’s Stocks Sink to April 2009 Low as Quarterly Losses Mount

September 30, 2011

Sept. 30 (Bloomberg) -- China’s stocks fell, sending the benchmark index to its lowest close since April 2009, on signs growth is slowing as the government maintains measures to curb inflation and overseas demand for exports falters.

Anhui Conch Cement Co. and Sany Heavy Industry Co. paced a decline by construction-related stocks after a manufacturing gauge contracted for a third month. Citic Securities Co. and Industrial Securities Co. led a drop among brokerages on concern share-price declines will curb trading revenue. China’s markets will be closed next week for holidays.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 6.12 points, or 0.3 percent, to 2,359.22 at the 3 p.m. close. The CSI 300 Index lost 0.3 percent to 2,581.35.

“Next quarter may see a lot of companies revising down their earnings forecasts amid the slowdown in the economy,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “We are pretty cautious ahead of the weeklong holiday because the risk of Europe’s debt crisis is still there.”

The Shanghai Composite sank 15 percent this quarter, 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.

Consumer Spending

Concern that Europe’s sovereign-debt crisis will spread and the U.S. economic recovery is faltering has wiped out more than $9 trillion of value from global equities this quarter, driving investors to the relative safety of the yen, dollar and Treasuries. Data today may show U.S. consumer spending slowed and German retail sales fell, after industrial production in Japan and South Korea grew less than economists had forecast.

The reading of 49.9 for the September purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics today, was unchanged from August and compared with a preliminary 49.4 figure published last week. Reading above 50 separates expansion from contraction. The contraction is the longest since 2009.

A measure of 72 industrial stocks retreated 0.9 percent today, the most among the CSI 300’s 10 groups. Anhui Conch, China’s biggest cement maker, fell 2.6 percent to 17.20 yuan. Tangshan Jidong Cement Co. plunged 3.3 percent to 15.96 yuan. Sany Heavy, the biggest Chinese machinery maker, dropped 2.6 percent to 14.41 yuan.

Slowdown Forecast

More than half the global investors surveyed by Bloomberg predict Chinese growth will slow to less than 5 percent annually by 2016, according to results released yesterday.

Citic Securities, China’s biggest listed brokerage, slid 1 percent to 11.25 yuan. Industrial Securities fell 6.9 percent to 13.39 yuan. Everbright Securities Co. lost 2.1 percent to 12.04 yuan.

Shares worth an average 58.4 billion yuan ($9.16 billion) changed hands on the Shanghai Stock Exchange every day this month, compared with an average 122.2 billion yuan for the first half of the year, according to data compiled by Bloomberg.

Deposits at Chinese banks grew 27.5 billion yuan in July and August, 98 percent less than a year earlier, central bank data show. Savings at the nation’s four biggest lenders fell 420 billion yuan in the first half of September, according to the China Securities Journal, controlled by the state-run Xinhua news agency. Deposits haven’t fallen in a quarter since at least 1992, data compiled by Bloomberg show.

Bank Profits

“The slowdown in deposits will probably continue for another year” as inflation persists, said Ye Yunyan, a Beijing- based analyst at China Galaxy Securities Co. “If lending slows further due to this, it’s surely going to have a negative impact on bank profits.”

U.S. Securities and Exchange Commission Enforcement Director Robert Khuzami said the Department of Justice is reviewing allegations of accounting fraud at Chinese companies operating out of the Asian nation, according to an interview with Reuters.

In the past year, regulators have intensified scrutiny of China-based companies listed on U.S. exchanges amid concern that the firms weren’t complying with accounting standards. The SEC’s investigation has focused on so-called reverse mergers, in which closely held firms buy shell companies that allow them to sell shares on exchanges without the scrutiny that would surround an initial public offering.

China Communications Construction Co. received approval from the China Securities Regulatory Commission to sell shares in Shanghai, according to a statement posted on the regulator’s website. The nation’s biggest port builder may raise as much as 20 billion yuan, it said in a Sept. 24 statement.

Sinohydro Group Ltd. raised 13.5 billion yuan 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.

--Zhang Shidong. Editors: Richard Frost, Matthew Oakley

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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