Bloomberg News

China’s Stocks Decline to 2-Year Low on Exports, Property Curbs

December 12, 2011

Dec. 12 (Bloomberg) -- China’s stocks fell to the lowest level in more than two years, after the government pledged to keep property curbs next year and slumping growth in exports to Europe added to concerns the economic slowdown is deepening.

China Vanke Co. and Poly Real Estate Group Co. dropped more than 3 percent after the official Xinhua News Agency said China will maintain a “prudent” monetary policy in 2012. China Shipping Container Lines Co., the country’s second-largest carrier of sea-cargo boxes, slid to a three-year low on concerns decelerating exports will cut transport demand. Haitong Securities Co. fell for a second day after people familiar with the matter said it scrapped a plan to sell shares in Hong Kong.

“The major worry for the economy comes from the property market,” said Dai Ming, fund manager at Shanghai Kingsun Investment Management & Consulting Co. “Investors are very wary of the impact of the curbs on economic growth next year. Investor confidence is very weak and stocks may fall further.”

The Shanghai Composite Index dropped 23.73 points, or 1 percent, to 2,291.55, the lowest close since March 20, 2009. The CSI 300 Index fell 1 percent to 2,477.69. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.3 percent on Dec. 9 in New York.

The Shanghai Composite 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 that’s above government targets. The tight monetary policies and the debt crisis in Europe, China’s biggest export market, have boosted concern the slowdown is worsening.

Property Curbs

A measure of property stocks on the Shanghai Composite slumped 2.4 percent, the most among the five industry groups.

Vanke, the nation’s biggest listed property developer, slid 3.2 percent to 7.30 yuan. Poly Real Estate, the second largest, fell 3.5 percent to 9.77 yuan. Gemdale Corp. retreated 5.2 percent to 4.57 yuan.

China will maintain its “unswerving stance” on property- market regulation next year to return housing prices to a “reasonable level,” Xinhua reported on Dec. 9 after the market closed, citing a meeting of the Communist Party’s Politburo chaired by President Hu Jintao. The government will maintain a “prudent” monetary policy and a “proactive” fiscal policy next year, it said.

The decision of the 25-member body that oversees policy- making came ahead of a work conference that will set economic guidelines for the coming year. That event may take place Dec. 12-14, according to the Economic Observer newspaper.

Exports Slump

China Shipping Container lost 1.8 percent to 2.70 yuan, the lowest close since Dec. 31, 2008. Cosco Shipping Co., a unit of China’s biggest shipping company, fell 1 percent to 4.75 yuan.

China’s exports rose 13.8 percent in November from a year earlier, the customs bureau said over the weekend. Excluding distortions in January and February each year, that was the least since export growth resumed in December 2009. That compared a 15.9 percent increase in October. The trade surplus fell 35 percent.

Shipments to the European Union rose 5 percent from a year earlier, a quarter of the pace reported in July and August. Sales to Germany, Europe’s biggest economy, fell 1.6 percent and those to Italy dropped for a third month. Europe makes up about 18 percent of its overseas shipments, according to Shenyin & Wanguo Securities Co.

Haitong Securities, China’s third-biggest brokerage by market value, dropped 0.6 percent to 8.26 yuan, extending a decline of 1.4 percent on Dec. 9. Three people with knowledge of the matter said Haitong canceled plans to raise as much as $1.7 billion in a Hong Kong share sale.

Slumping Equities

Volatile stock markets curbed demand for shares the Shanghai-based company was selling, said one of the people, who declined to be identified as the process is private.

The value of shares traded on Shanghai’s stock market slumped to the lowest in three years on Dec. 9, representing a bullish signal for China Merchants Securities Co. and Central China Securities Co.

Shares worth 38.9 billion yuan ($6.11 billion) changed hands on the Shanghai Stock Exchange, the lowest value since Dec. 31, 2008, according to data compiled by Bloomberg. When the daily trading value fell to that low on Dec. 31, 2008, the Shanghai Composite surged 91 percent in the following seven months, spurred by a 4 trillion-yuan government stimulus package of building roads, bridges and airports.

“Low trading volume is one signal,” said Chen Wenzhao, a strategist at China Merchants Securities in Shanghai, an affiliate of China’s fifth-biggest bank. “More importantly, we’ve seen a reversal of monetary policies and liquidity will become better and better.”

Exports Slow

The central bank may release data for November new loans and money supply growth as soon as today. Banks may have extended 550 billion yuan of new loans last month and M2 money supply may have grown 12.8 percent, according to the median estimate of 28 economists surveyed by Bloomberg.

Investors betting on “aggressive” easing may be disappointed, Hao Hong, a Beijing-based equity strategist at China International Capital Corp., wrote in a note today. Policy easing will be gradual unless global economy deteriorates significantly, and monetary policy is only going to offset the slowdown to a certain extent instead of changing the trajectory of economic growth, he said.

Chinese shares traded in Hong Kong are moving in synch with mainland counterparts by the most on record as foreigners join domestic investors in becoming more pessimistic about the nation’s equities amid slowing growth.

The relationship between H shares in Hong Kong and yuan- denominated A shares in Shanghai was the closest ever, as measured by a correlation coefficient of 0.66 on Dec. 2, according to 120-day observation periods compiled by Bloomberg since January 1994. A correlation of 1 indicates the indexes move in lockstep, while zero shows there’s no relationship.

--Zhang Shidong. Editors: Allen Wan, 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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