Bloomberg News

China Stocks Fall, Capping Third Weekly Loss, as Banks Decline

November 27, 2011

Nov. 25 (Bloomberg) -- China stocks fell, dragging the benchmark index to a third weekly loss, after Industrial & Commercial Bank of China Ltd.’s chairman said he expects the central bank to keep tight monetary policies.

ICBC declined 1.4 percent, pacing losses by banks, after its Chairman Jiang Jianqing said “very high” inflationary pressure means monetary policy will remain prudent. China Vanke Co. dropped among property companies after the China Securities Journal said land purchases by the nation’s top 10 developers slumped this year.

“Liquidity is still tight in the real economy and the capital market because the current fine-tuning of monetary policies isn’t enough to ease companies’ cash crunch,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Earnings are the other risk to investors and they will be uglier this year.”

The Shanghai Composite Index dropped 17.33 points, or 0.7 percent, to 2,380.22 at the close, capping a seventh day of losses out of eight and reaching the lowest level since Oct. 24. The CSI 300 Index slid 0.7 percent to 2,569.97.

The Shanghai Composite slid 1.5 percent this week after a preliminary purchasing managers’ index showed the country’s manufacturing may contract this month by the most since March 2009 as home sales slide.

Euro Concerns

The stock gauge is down 15 percent this year, following last year’s 14 percent plunge, after the central bank raised rates three times and lifted the reserve-requirement ratio to curb inflation that’s near a three-year high. It’s valued at 11.3 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

The MSCI Asia Pacific Index lost 1 percent today after German Chancellor Angela Merkel ruled out common euro-area bonds and a bigger role for the European Central Bank in fighting the region’s debt crisis, damping the earnings outlook for Asian exporters.

ICBC, the nation’s biggest bank, dropped 1.4 percent to 4.22 yuan, the most in two weeks. Agricultural Bank of China Ltd., the fourth largest by assets, slid 1.2 percent to 2.54 yuan. China Merchants Bank Co. fell 0.9 percent to 11.48 yuan.

“Inflationary pressure in China is still very high,” ICBC Chairman Jiang said in Cape Town yesterday. “I think the direction for China’s monetary policy and credit policy will still be very prudent.”

Developers Sink

A gauge tracking property stocks in the Shanghai Composite declined 1.2 percent, the most among the five industry groups. Vanke, the nation’s biggest listed property developer, sank 2.1 percent to 7.10 yuan. Poly Real Estate Group Co., the second biggest, retreated 1.5 percent to 9.03 yuan.

Residential land spending fell 42 percent from a year earlier to 65.7 billion yuan ($10.3 billion) from January to October at the top 10 developers by sales, the China Securities Journal said.

The yuan is poised for a third weekly decline, the longest losing streak since July 2010, on speculation the government will slow the pace of appreciation to protect exporters.

China’s sovereign wealth fund may give “indirect” support to Europe through investments without being the nation’s main route for any aid, said Jesse Wang, the executive vice president of China Investment Corp.

Euro Bonds

Euro bonds are “not needed and not appropriate,” Merkel said at a press conference with Italian Prime Minister Mario Monti and French President Nicolas Sarkozy in Strasbourg, France. She said euro bonds would “level the difference” in euro-region interest rates. “It would be a completely wrong signal to ignore those diverging interest rates because they’re an indicator of where work still needs to be done.”

China will ban trading of securities and futures on unauthorized exchanges to regulate the market and prevent financial risks, the State Council said. Some of the trading activities have led to price manipulation and fund embezzlement by the exchange managers, the Cabinet said in a statement dated yesterday. Such problems may cause regional financial risks and endanger social stability, the statement said.

There are over 300 unregulated bourses across the country, the Financial Times reported today, citing analysts.

Xiamen Tungsten, China’s largest maker of tungsten products, rose 1.8 percent to 36.21 yuan after the Shanghai Securities News said the government will soon release a plan to develop the industry over the five years through 2015. The government plans to set up a reserve system for rare earths, tin, tungsten and other minor metals, according to the newspaper said, citing an unidentified deputy director of the China Nonferrous Metals Industry Association.

--Zhang Shidong. Editors: Richard Frost, Darren Boey

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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