Bloomberg News

Chinese Stock Indexes Decline on Lower Growth Target

March 05, 2012

China’s stocks fell for the third time in four days as a lower economic growth target from the government overshadowed speculation of measures to bolster the world’s second-largest economy.

SAIC Motor Corp. sank the most in five weeks on speculation the nation’s car sales are slowing. PetroChina Co., the nation’s biggest oil company, slid 1.1 percent after saying losses from processing crude last year were larger than expected. China North Optical-Electrical Technology Co. (600435) paced gains among defense-related companies after China said it plans to increase military spending by 11.2 percent this year.

The Shanghai Composite Index (SHCOMP) fell 15.69 points, or 0.6 percent, to 2,445 at the close. About six stocks dropped for every five that rose. The CSI 300 Index (SHSZ300) retreated 0.6 percent to 2,662.70. Premier Wen Jiabao unveiled a growth target of 7.5 percent this year at the opening of a national congress today and reiterated the government will maintain a “proactive” fiscal policy and a “prudent” monetary policy.

“Though the government is more tolerant of lower economic growth rates going forward, that also increases the chance for policymakers to ease tightening policies a bit,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “There are still investment opportunities out there.”

The Shanghai Composite advanced 0.9 percent last week, a seventh week of gains and the longest winning streak since July 2009. It has rebounded 11 percent this year on speculation the central bank will add to a Feb. 18 cut in reserve requirements to halt a decline in economic growth.

Annual Meeting

China’s growth target for this year, the lowest goal since 2004, suggesting leaders will tolerate slower expansion while they try to reduce the nation’s reliance on exports.

Officials also set an inflation target of 4 percent, unchanged from last year’s goal, according to a speech Premier Wen delivered to about 3,000 lawmakers at the annual meeting of the National People’s Congress that started in Beijing today.

By cutting the 8 percent goal maintained from 2005 to 2011, Wen, 69, is signaling the ruling Communist Party is determined to shift the makeup of growth toward consumption and away from exports and investment. Wen and fellow officials are also preparing to begin a once-in-a-decade handover of power later this year to a new set of leaders.

China aims to increase retail sales by 14 percent in 2012, according to a work report from the National Development and Reform Commission distributed at the NPC in Beijing today. China is targeting fixed-asset investment to rise by 16 percent this year, according to the report.

Auto Sales

Non-manufacturing industries contracted for the first time in three months in February. The non-manufacturing purchasing managers’ index fell to 48.4 from 52.9 in January, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement over the weekend. A reading above 50 indicates an expansion.

SAIC Motor (600104), China’s largest carmaker, fell 2.3 percent, the most since Jan. 31, to 16 yuan. It closed on March 2 at the highest level since Nov. 4. Anhui Jianghuai Automobile Co., a unit of China’s biggest light-truck exporter, lost 2 percent to 7.74 yuan. Beiqi Foton Motor Co., the nation’s biggest commercial-vehicle maker, dropped 2.1 percent to 7.32 yuan.

Deliveries of passenger autos, including sport-utility vehicles and light-goods vans, in the first two months of 2012 fell 3 percent from a year earlier, based on the median estimate of five analysts surveyed by Bloomberg. That would be the biggest drop since 2005, when they fell 8.9 percent, according to the China Association of Automobile Manufacturers, which will release industry data later this month.

Refining Losses

China will control the increase in auto manufacturing capacity and encourage mergers and reorganizations in the industry, according to the report delivered by Premier Wen.

PetroChina retreated 1.1 percent to 10.47 yuan and was the biggest drag on the Shanghai Composite. Refining losses were bigger than expected last year because oil prices rose, Chairman Jiang Jiemin said in Beijing today. China Petroleum & Chemical Corp. (600028), the nation’s largest oil refiner, lost 1.1 percent to 7.57 yuan.

“Losses are widening,” Jiang said. “We can’t see a turnaround in the situation. It’s larger” than the 50 billion yuan ($7.9 billion) loss expected by the company, he said.

China North Optical, which gets about 58 percent of its revenue from military-dual use products, climbed 4.5 percent to 10.14 yuan. China CSSC Holdings Ltd. (600150), a unit of the nation’s biggest shipbuilder, jumped 5.4 percent to 33.18 yuan.

Military Spending

Military spending is set to rise this year to about 670 billion yuan, Li Zhaoxing, a spokesman for the NPC, said yesterday. China’s defense spending is the second highest in the world after the U.S.

Chinese U.S.-listed stocks advanced last week, with the Bloomberg China-US 55 index gaining 1.1 percent, on prospects the government will roll out measures to boost growth at this week’s NPC. The Bloomberg index, which tracks the most-traded U.S.-listed Chinese companies, was unchanged in New York on March 2.

“They may talk about high-investment project approval and roll out measures to help the consumer as growth was a little bit slower than what they want,” Jeff Papp, a senior analyst in Lisle, Illinois, at Oberweis Asset Management Inc., which manages $700 million including Chinese stocks, said by phone.

The central bank lowered banks’ reserve requirements for the second time in three months in February to boost lending and sustain growth, following five interest-rate increases from October 2010 to July 2011 aimed at slowing inflation.

--Zhang Shidong. With assistance from Belinda Cao in New York. Editors: Darren Boey, Chan Tien Hin

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


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus