Bloomberg News

China Stocks Drop for Sixth Day, Longest Losing Streak Since May

November 23, 2011

Nov. 23 (Bloomberg) -- China’s stocks dropped for a sixth day, the benchmark index’s longest losing streak in six months, after data indicated manufacturing will shrink amid a faltering global economy.

Sany Heavy Industry Co. and Anhui Conch Cement Co. sank at least 1 percent after preliminary data for a purchasing managers’ index showed China’s manufacturing may contract this month by the most in almost three years. PetroChina Co. retreated for a seventh day on lower oil prices. China Shipping Development Co. dropped 2.1 percent after the U.S. economy grew less than expected. Citic Securities Co. paced losses by brokerages as trading values declined.

“Slowing economic growth at home and abroad is the major concern to the market,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million.

The Shanghai Composite Index dropped 17.56 points, or 0.7 percent, to 2,395.06, capping a six-day, 5.3 percent decline and closing at the lowest level since Oct. 24. The CSI 300 Index fell 1 percent to 2,584.01. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 0.4 percent yesterday.

The Shanghai Composite has fallen 15 percent this year, exceeding last year’s 14 percent plunge, 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. It’s valued at 11.4 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

Trading Value

Sany Heavy, the biggest Chinese machinery maker, retreated 1 percent to 13.62 yuan. Anhui Conch, China’s biggest cement maker, fell 2 percent to 16.90 yuan.

The manufacturing reading of 48 reported by HSBC Holdings Plc and Markit Economics today compares with a final number of 51 last month. A number below 50 indicates a contraction. HSBC’s preliminary index, called the Flash PMI, is based on 85 percent to 90 percent of responses to a survey sent to executives at more than 400 companies.

Industrial-output growth “is likely to slow further” in coming months on weakness in domestic and overseas demand, said Qu Hongbin, a Hong Kong-based economist for HSBC. Moderating inflation may leave “more room for Beijing to step up selective easing measures,” he said.

The central bank reduced the reserve ratio by 50 basis points to 16 percent for “several” small rural banks in Zhejiang province to counter the spread of informal lending, Credit Suisse said.

No Overall Easing

While the news is an “encouraging sign of easing,” the brokerage doesn’t believe this will develop into “overall easing,” Dong Tao, analyst at Credit Suisse, wrote in a report dated today. “We believe the general doctrine of ‘‘easing in some areas but tightening in others’’ is intact.”

China is unlikely to announce any “big” policy easing as the government is still dealing with the negative effects of previous stimulus and the slowdown in the economy has been “gradual,” UBS AG said in a report dated yesterday.

China Shipping, a unit of China’s second-biggest sea-cargo group, fell 2.1 percent to 6.85 yuan. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, lost 1.3 percent to 6.17 yuan.

Data today may show European manufacturing and services shrank this month and U.S. durable goods orders fell in October. Figures yesterday showed the U.S. economy grew less than estimated last quarter, amid minutes from the Federal Reserve’s last meeting that showed some policy makers thought monetary easing may be necessary.

Oil Companies

A gauge tracking energy producers on the CSI 300 lost 1.7 percent, the most among the CSI 300’s 10 industry groups. PetroChina, the nation’s biggest oil company, dropped 0.7 percent to 9.70 yuan. China Petroleum & Chemical Corp., the second-biggest, also known as Sinopec, lost 0.4 percent to 7.26 yuan.

Crude for January delivery decreased 1.6 percent to $96.49 a barrel in New York after the American Petroleum Institute said fuel supplies climbed 5.42 million barrels last week. An Energy Department report today may show they rose by 1 million barrels, according to a Bloomberg News survey.

Citic Securities, China’s biggest listed brokerage, fell 3 percent to 11.19 yuan. Haitong Securities Co. slid 5.2 percent to 8.23 yuan, the biggest loss since Nov. 16.

Shares worth 51 billion yuan ($8 billion) changed hands on the Shanghai stock market yesterday, about half of the average daily trading value of 103.7 billion yuan this year, according to data compiled by Bloomberg.

--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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