Bloomberg News

China’s Stocks Fall to Lowest Since 2009, Cap Fifth Weekly Loss

December 09, 2011

Dec. 9 (Bloomberg) -- China stocks fell, dragging the benchmark index to its lowest level since March 2009, as concern slowing growth will hurt earnings overshadowed the release of data showing inflation cooled last month.

Jiangxi Copper Co. and Tongling Nonferrous Metals Group Co. dropped among commodity producers after industrial output grew the least in two years and the European Central Bank indicated it wouldn’t purchase more debt. SAIC Motor Corp. slid 1.2 percent after China’s passenger-car sales rose at the slowest pace in six months. China Vanke Co. and Poly Real Estate Group Co. paced gains among developers as inflation cooled to the slowest pace in 14 months in November, giving policy makers more room to lift banks’ lending restrictions.

“Policies will gradually be loosened amid the backdrop of the economic slowdown,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “Still, investors remain concerned about how bad the economy will get next year and that’s what’s hindering buying now.”

The Shanghai Composite Index dropped 14.55 points, or 0.6 percent, to 2,315.27 at the close, the lowest since March 25, 2009, and a fifth weekly loss. The CSI 300 Index fell 0.9 percent to 2,503.46. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 2 percent in New York yesterday.

Industrial output increased 12.4 percent in November, the slowest pace since August 2009, the statistics bureau said on its website. That compared with the median forecast for a 12.6 percent growth of economists surveyed by Bloomberg. Retail sales rose 17.3 percent last month and fixed-asset investment increased 24.5 percent in first 11 months of 2011, it said.

European Exports

The Shanghai Composite slipped 1.9 percent this week on concern a slumping property market and Europe’s debt crisis will damp growth. The value of shares traded in Shanghai slumped to the lowest level in three years on Dec. 7 as the city’s gauge headed for a second straight year of declines.

An index of the CSI 300’s material stocks dropped 1.2 percent today amid speculation Europe’s debt crisis will hurt commodity exports to the region as the same time as China’s domestic demand slows. Europe is China’s biggest export market, making up 18 percent of its overseas shipments, according to Shenyin & Wanguo Securities Co.

Jiangxi Copper, China’s biggest copper producer, fell 1.7 percent to 24.27 yuan. Tongling Nonferrous Metals, the second biggest, lost 0.9 percent to 18.73 yuan. Zhuzhou Smelter Group Co., the nation’s biggest producer of refined zinc, retreated 1.8 percent to 10.03 yuan.

The MSCI Asia Pacific Index slumped 2.2 percent after the ECB damped speculation it would step up purchases of government bonds. European Union banks must raise 114.7 billion euros ($152.9 billion) in fresh capital, up from a previous estimate of 106 billion euros, the European Banking Authority said.

Developers Gain

A gauge tracking property stocks on the Shanghai Composite gained 0.5 percent, the only increase among five industry groups. Vanke, the nation’s biggest listed property developer, rose 0.7 percent to 7.54 yuan. Poly Real Estate, the second largest, advanced 1.7 percent to 10.12 yuan, a fifth straight rise.

Consumer prices rose 4.2 percent from a year earlier, the statistics bureau said on its website. That was lower than all estimates in a Bloomberg News survey of 35 economists that had a median forecast of 4.5 percent. Producer prices gained 2.7 percent, the smallest increase in 23 months.

The fourth month of slowing inflation may prompt Premier Wen Jiabao to tilt policies more toward growth as Europe’s crisis bites and government property curbs damp home sales. China may cut the benchmark lending rate next quarter when economic growth reaches a “trough,” according to Nomura Holdings Inc.

Stock Valuations

The Shanghai index has tumbled 18 percent in 2011, exceeding last year’s 14 percent decline, after the central bank raised interest rates and lenders’ reserve-requirement ratios to curb inflation. The index is valued at 11 times estimated earnings, compared with a six-year average of 18.3 times, according to data compiled by Bloomberg.

China should maintain property curbs because the results of the policies haven’t been solidified, Ren Xingzhou, a director at the market economy research department of the State Council’s Development Research Center, wrote in a People’s Daily article. Housing prices in some Chinese cities are still relatively high, they wrote in the newspaper.

Consumer-related shares declined after Citigroup Inc. said the slowdown in China’s domestic consumption and overseas demand has been “faster than expected” this quarter. The brokerage cited feedback from retailers and manufacturers at a Hong Kong conference.

Auto Sales

SAIC, China’s largest carmaker, retreated 1.2 percent to 13.43 yuan. FAW Car Co., which makes passenger cars with Volkswagen AG, slid 2.8 percent to 7.86 yuan. Gree Electric Appliances Inc., the country’s largest maker of home air- conditioners, lost 2.5 percent to 16.57 yuan.

Wholesale deliveries of passenger cars, including sport- utility vehicles and minivans, gained 0.3 percent, the China Association of Automobile Manufacturers said today in a statement. That compares with the 0.5 percent median estimate of five analysts surveyed by Bloomberg and is the slowest pace since May, when sales dropped 0.1 percent.

Most global investors predict China will face a banking crisis within the next five years, paring their appetite for the nation’s shares and eroding confidence in its leadership, a Bloomberg Global Poll indicated.

Sixty-one percent of respondents said they anticipate a crash in the financial industry by late 2016, and only 10 percent were confident China’s banks will escape trouble, according to the quarterly poll of 1,097 investors, analysts and traders who are Bloomberg subscribers conducted Dec. 5-6.

Chongqing Brewery Co. tumbled the 10 percent daily limit for a second day to 65.66 yuan. The stock resumed trading yesterday after an eight-day suspension.

--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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