Chinese equities fell for an eighth day in New York, sending the benchmark index to the longest run of declines on record, after a cut in local banks’ reserve ratios failed to alleviate concerns of economic slowdown.
Melco Crown Entertainment Ltd. (MPEL:US), a Macau Casino operator, sank 9.6 percent, leading the retreat on the Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. The gauge tumbled 2.4 percent to 95.40. Yanzhou Coal Mining Co. (YZC:US), China’s fourth-largest coal producer, dropped 5.1 percent to trade at the widest discount to its shares in Hong Kong in more than a week, after prices of the fuel retreated for the first time in three years.
Chinese policy makers lowered reserve requirement ratios on May 12 for a third time since November after reports last week showed industrial production, retail sales and trade grew in April less than analysts forecast. Stocks tumbled in Europe and the U.S. on concern a potential exit of Greece from the single European currency may disrupt financial markets and derail global growth.
The reserve ratio cut is “not enough to get people enthusiastic,” Nicholas Field, who helps oversee $23 billion of emerging market assets at Schroders Plc, said in a phone interview from London. “The growth trajectory has been disappointing. A lot of bad news has been priced in. It won’t take much to get a rally, but we are not there yet.”
The Bloomberg China-U.S. Index’s eight-day decline was the longest losing streak since at least 2005 when Bloomberg started tracking the data.
China ETF Sinks
The IShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., retreated 1.7 percent to $34.74. The Shanghai Composite Index of mainland stocks slid 0.6 percent to a three-week low. The Standard & Poor’s 500 Index (SPX) of U.S. shares declined 1.1 percent as Greece’s impasse in forming a new government fuels speculation the nation may leave the euro region.
China’s reserve-ratio cut, effective May 18, reduces the required level against deposits by 50 basis points to 20 percent for major banks and 18 percent for smaller institutions. The move will probably release 450 billion yuan ($71 billion) into the financial system, according to Goldman Sachs Group Inc.
China Southern Airlines Co. (ZNH:US), the nation’s biggest carrier by passenger numbers, declined 3.9 percent to $22.01, the most in a month. China warned its tourists last week to avoid “unnecessary” travel to the Philippines amid a dispute between the two countries over an island in the South China Sea.
Melco Crown fell to $13, the lowest level in a month. Macau gaming revenue over the first 13 days of this month may be about 28 billion patacas ($3.5 billion), Harry Curtis, an analyst at Nomura Securities International Inc., said in a note today. It compared with Nomura’s estimate of 29 billion patacas.
American depositary receipts of Yanzhou Coal dropped to $17.78, trading 2.3 percent lower than its equivalent shares in Hong Kong. The price of Chinese coal for power stations retreated for the first time in three years for May, according to the China Coal Transport and Distribution Association.
Focus Media Holding Ltd., (FMCN:US) a Shanghai-based outdoor advertising company, tumbled 7.6 percent to $21.51, the lowest level since Jan. 31.
A government report last week showed China’s industrial production increased at the slowest pace since 2009, while retail sales grew the least in more than a year. China’s gross domestic product growth slowed to 8.1 percent in the first quarter, the lowest pace in almost three years.
Banks including Citigroup Inc. and JPMorgan Chase & Co. pared their growth forecasts for China following the April economic data releases. Citigroup has cut its estimate for GDP growth this year to 8.1 percent, from an earlier forecast of 8.4 percent.
“Anything less than 7.5 percent GDP growth would border on a disaster,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, wrote by e-mailed response. “Material stocks as a whole will continue to suffer with any incremental weakness.”
Of the 25 companies in the China-US index that have reported earnings since April 1, 11 have fallen short of analysts’ forecasts, including Yanzhou Coal and China Telecom Corp. (CHA:US), data compiled by Bloomberg show.
Sixteen companies in the China-US index are scheduled to release first-quarter results this week, including Sina Corp. (SINA:US) and Ctrip.com International Ltd. (CTRP:US), according to data compiled by Bloomberg.
China started cutting its reserve ratio in December after boosting it nine times since November 2010, while holding off on lowering interest rates. The Bloomberg China stock index has dropped 0.7 percent since the first reserve cut was announced on Nov. 30, while SouFun Holdings Ltd. (SFUN:US), which owns the nation’s largest real estate website, has added 21 percent.
“The question for investors is what will the government do next,” Elena Ogram, who manages $50 million in emerging market assets, including Chinese stocks, at Bank am Bellevue AG in Zurich, said by phone. “Longer term, money will flow and sectors such as real estate and industrials stand to benefit. But for the moment, it’s still unclear what the authorities plan to do with this new pool of money.”
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