Bloomberg News

China’s Stocks Fall to Two-Week Low After Data

May 11, 2012

China’s stocks fell to a two-week low as industrial production data missed economists’ estimates, fueling concerns of a deeper economic slowdown.

Angang Steel Co. and Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. slumped more than 1 percent on concern product demand will decline. Poly Real Estate Group Co. (600048), the nation’s second-largest publicly traded developer, dropped 1.3 percent after Soufun Holdings Ltd., a real estate website owner, said the nation may continue property curbs this year.

The Shanghai Composite Index (SHCOMP) lost 0.6 percent to 2,394.98 at the close, the lowest level since April 24, even after data showed growth in China’s consumer prices slowed to 3.4 percent in April from 3.6 percent the previous month. The Shanghai gauge climbed 8.9 percent this year on optimism lower inflation will give the government scope to ease monetary policies to bolster growth. The measure lost 2.3 percent this week in the biggest weekly drop since March.

“Investors are in a risk-off mode so the industrial production will definitely impact sentiment negatively,” Hao Kang, a Beijing-based fund manager at ICBC Credit Suisse Asset Management Co. which oversees about $8.7 billion, said in a phone interview. “Luckily inflation eased at least, so the government has leeway to ease policies.”

The CSI 300 Index (SHSZ300) dropped 0.8 percent to 2,636.92. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 0.3 percent to 98.39, the weakest close since Jan. 24 in New York yesterday.

Unexpected Slowdown

About two stocks declined for each one that rose in the Shanghai Composite. China’s industrial output rose 9.3 percent in April from a year earlier, the statistics bureau reported during the afternoon trading session. The increase compared with the 12.2 percent median estimate in a Bloomberg News survey of 32 economists and 11.9 percent in March.

Baotou Steel lost 2.3 percent to 43.86 yuan and Angang retreated 1.2 percent to 4.31 yuan. China Shenhua Energy Co., the nation’s largest coal producer, sank 1.6 percent to 26.49 yuan. SAIC Motor Corp. (600104), the biggest Chinese automaker, declined 1.3 percent to 15.29 yuan.

Poly Real dropped 1.3 percent to 12.63 yuan, while Gemdale Corp. (600383) retreated 1.1 percent to 6.42 yuan. More than 60 percent of home buyers, developers and experts think home prices won’t fall to a “reasonable” level this year, Soufun said in an e-mailed report. The value of homes sold in China from January to April fell 13.5 percent to 1.02 trillion yuan from a year earlier, according to data from the statistics bureau today.

Health Stocks Rise

A gauge of healthcare stocks posted the only advance among the CSI 300’s 10 industry groups as investors bet earnings will be sheltered from an economic slowdown. North China Pharmaceutical Co. gained 2.4 percent to 6.8 yuan. Harbin Pharmaceutical Group Co. increased 1.8 percent to 7.34 yuan.

A 51 percent majority of finance professionals in a quarterly Bloomberg Global Poll said they are confident in the policies of President Hu Jintao. The share was the same as in January, unaffected by the aftermath of former Chongqing Communist Party head Bo Xilai’s March ouster, which clouded the outlook for this year’s once-in-a-decade leadership change.

China’s economy will either improve or remain stable this year, according to 68 percent of respondents, with the share anticipating a deterioration falling to 30 percent, the lowest level since the question was first included in the poll in September.

Unstable Prices

About 8.2 billion shares changed hands in the Shanghai Composite yesterday, 3 percent higher than the daily average this year. Thirty-day volatility in the gauge was at 17.2 today. Stocks in the gauge are valued at 10.3 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

The inflation data was released this morning after the People’s Bank of China said in its first-quarter monetary policy report that it’s concerned about an upside risk in prices. Overall price gains have remained in a downward trend but are unstable, according to the report. The central bank said it will use a combination of liquidity tools including bank reserve-ratio changes to adjust cash in the banking system, according to the report.

“The central bank will probably cut the reserve ratio requirement this weekend or the latest by next weekend,” Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai, said by phone today after the consumer prices report. “The requirement is still a bit high and it appears that inflation could ease further in the next two months.”

Borrowing Costs

The central bank has cut reserve ratios once this year after boosting them and interest rates in 2010 and 2011 to tame inflation. Borrowing costs have not been reduced since 2008. China’s economy grew at the slowest pace since the second quarter of 2009 in the first three months of this year, as the European debt crisis and sluggish U.S. recovery crimped demand for the world’s largest exporting nation.

51job Inc., a Shanghai-based recruiting service provider, sank 8.3 percent in New York, the most since Sept. 30, to $51.30. Second-quarter (JOBS:US) sales will be between $57.2 million and $59.5 million in the second quarter, compared with revenue of $60.5 million in the first three months of this year, the company said in a statement after markets closed on May 9.

7 Days Group Holdings Ltd., a budget hotel operator based in Guangzhou, China, fell 5.7 percent to $10.88, the lowest close since July 2010. Sales will climb to as much as 640 million yuan ($101 million) in the three month ending in June from 546 million yuan in the previous quarter, the company said on May 9. The median forecast (SVN:US) of seven analysts surveyed by Bloomberg was for an increase to 647 million yuan.

Lower Revenue

Average revenue per share for Chinese companies in the Bloomberg China-US gauge may decline to $10.10, the lowest level since the second quarter of 2010, from $11.70 in the first three months of this year, according to data compiled by Bloomberg.

Of the 23 companies on the China-US index that have reported quarterly earnings since April 1, 10 fell short of analysts’ predictions, from Yanzhou Coal Mining Co. (YZC:US), China’s fourth-largest producer, and China Telecom Corp. (CHA:US), the nation’s biggest fixed-line carrier, data compiled by Bloomberg show.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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Companies Mentioned

  • JOBS
    (51job Inc)
    • $34.27 USD
    • 0.47
    • 1.37%
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