Bloomberg News

China Stocks Post Weekly Drop as Economic Growth Concerns Mount

November 13, 2011

Nov. 11 (Bloomberg) -- China’s stocks posted a weekly drop on concern Sinochem Corp.’s initial public offering will divert funds from other equities and the Europe debt crisis may hurt exports to the region and deepen the nation’s economic slowdown.

Anhui Conch Cement Co. led losses for material producers after Daiwa Capital Markets said weakening exports will hurt manufacturers. China Shipbuilding Industry Co. slid the most in three weeks as it announced plans to sell convertible bonds after cancelling a private share placement. Sinochem announced plans to raise up to $5.5 billion in what would be China’s largest IPO this year and comes less than a month after Sinohydro Group Ltd. sold shares.

“Investors are worried government easing is not fast enough and the economy may retreat faster than the policy change,” said Zhang Han, a strategist at Guotai Junan Securities Co. “And with the size of the new IPO, there will also be concerns it means investors will put take their money out of the market in the short-term to wait for that listing.”

The Shanghai Composite Index added 1.5 point, or less than 0.1 percent, to 2,481.08 at today’s close. The measure declined 1.9 percent this week, the first drop in three weeks. The CSI 300 Index slipped 0.2 percent today, capping a weekly loss of 2.5 percent.

The Shanghai Composite has fallen 12 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation that’s near a three-year high. The index is valued at 11.6 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

Exports Slow

China’s stocks fell this week on speculation the world’s second-biggest economy will slow further as exports slump. A customs bureau report yesterday showed October exports rose 15.9 percent from a year earlier, the slowest pace since December 2009, as the deepening debt crisis in Europe, China’s biggest overseas market, crimped demand.

The pace at which China’s exports are slowing may show “obvious acceleration,” Ba Shusong, a researcher at the State Council’s Development Research Center, said at a forum in Beijing today.

A trade deficit for some of the months next year can’t be ruled out if external volatility intensifies, Ba said.

China’s trade data signals the downtrend for exports has accelerated while forward economic indicators suggest trade flows are likely to weaken further, Daiwa said in a report.

“The long cold winter for manufacturers may have just started,” said Mingchun Sun, Hong Kong-based economist at Daiwa.

Anhui Conch, the nation’s biggest cement producer, fell 1.9 percent today, adding to a 7.7 percent drop for the week, the most among material producers.

Shippers Slump

China Shipbuilding slumped 2.7 percent to 6.74 yuan today. The company plans to sell 8 billion yuan of convertible bonds under a private placement. This year is “the most painful ever” for world shipping, China Cosco Holdings Co. Chairman Wei Jiafu said at a conference on Nov. 3 in Hainan province.

China faces a pessimistic foreign trade outlook amid global economic turmoil, rising labor and raw material costs and mounting pressure on the yuan, Xinhua News Agency reported today, citing Zhong Shan, vice commerce minister.

In Greece, Lucas Papademos was appointed the new prime minister, ending four days of wrangling between leaders of the nation’s political parties. At stake is the fate of an 8 billion-euro loan installment under an earlier 110 billion-euro EU-led bailout agreed in May 2010. The tranche must be paid before the middle of December to prevent a collapse of the country’s financial system.

‘Not Resolved’

“The Europe crisis is not resolved,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “Within the A-share market, with such a big IPO coming up and no easing in sight, sentiment remains weak.”

Sinochem, the country’s largest supplier of chemical products, aims to sell as many as 26.5 billion new shares in Shanghai, according to a statement posted on the Ministry of Environmental Protection’s website yesterday.

China Petroleum & Chemical Corp. rose 1.2 percent to 7.50 yuan after its parent agreed to pay $3.54 billion for a stake in Galp Energia SGPS SA’s Brazilian unit.

After the market close, People’s Bank of China data showed local-currency lending was 586.8 billion yuan ($92.5 billion) in October, compared with the 500 billion yuan median estimate in a Bloomberg News survey and 470 billion yuan in September. M2, a measure of money supply, rose 12.9 percent last month.

--Editors: Allen Wan, Darren Boey

To contact Bloomberg News staff for this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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


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