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iShares FTSE China 25 Index Fund
China’s stocks fell for a second day, capping a monthly loss for the benchmark index, on speculation Europe’s debt crisis will hurt shipments to the country’s largest overseas market.
Shanghai International Port (Group) Co. (600018), operator of the world’s second-busiest harbor, slid 1.4 percent on concern trade will slow. Jiangxi Copper Co. dropped among commodity producers before a purchasing managers’ index tomorrow that economists say will show manufacturing slowed in May. Shenzhen Green Eco- manufacture Hi-tech Co. (002340) jumped by the 10 percent daily limit, leading gauges of smaller companies higher, after the government approved a plan to bolster new industries.
The Shanghai Composite Index (SHCOMP) sank 12 points, or 0.5 percent, to 2,372.23 at the close, extending yesterday’s 0.2 percent drop. The CSI 300 Index (SHSZ300) declined 0.4 percent to 2,632.04. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, lost 2.7 percent in at the close in New York.
“The major negative impact on China will be shrinking trade with Europe,” Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., said by phone today. “If the turmoil spills over to the countries like Italy and Spain, it will cause chaos in global financial markets.”
The MSCI Asia Pacific Index slid 0.5 percent today, joining a global sell-off that dragged the MSCI All-Country World Index down by 1.7 percent yesterday. The cost of protecting Spanish bonds against default climbed to a record yesterday and a Greek poll showed support for anti-austerity parties ahead of elections next month, while the European Commission challenged German remedies to the financial crisis.
Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.
Shanghai Port fell 1.4 percent to 2.86 yuan. Dalian Port (PDA) Co. lost 3.4 percent to 3.17 yuan.
The Shanghai Composite slipped 1 percent this month. It has climbed 7.9 percent this year on optimism the government will ease monetary policies and accelerate approvals of infrastructure projects to spur growth. Stocks in the measure are valued at 10.2 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.
China’s statistics bureau and logistics federation is due to release its purchasing managers’ index for May tomorrow. The measure may fall to 52 from 53.3 a month earlier, according to the median estimate of 26 economists in a Bloomberg survey. Fifty is the dividing line between expansion and contraction.
Jiangxi Copper, China’s biggest producer of the metal, fell 1.3 percent to 25.69 yuan. Tongling Nonferrous Metals Group Co. (000630), the second largest, lost 1.9 percent to 21.86 yuan. Aluminum Corp. of China Ltd., the listed unit of nation’s biggest maker of the metal, dropped 0.9 percent to 6.87 yuan.
The PMI data comes after the official Xinhua News Agency said in a May 29 article China has no plans for new stimulus measures on the scale unleashed during the global credit crisis in 2008. The nation has cut banks’ reserve-requirement ratios three times since November as its economy grew at the slowest pace in almost three years last quarter.
China may lower the reserve-requirement ratio next month, the official Xinhua News Agency said yesterday, citing Wang Jian, secretary of the macro economy institute of the National Development and Reform Commission. The government is also considering whether to cut interest rates “prudently,” Xinhua reported.
China’s economy will grow by about 8 percent this year and also in the “coming years,” Xinhua reported today, citing Fan Gang, a former central bank adviser. The economy expanded 9.2 percent last year, according to data compiled by Bloomberg.
Thirty-day volatility in the Shanghai Composite was at 13.7 today, the lowest level in almost 13 months. About 9.1 billion shares changed hands in the measure yesterday, 0.3 percent higher than the daily average this year.
The index is poised to gain 15 percent from yesterday’s close by year-end as slowing inflation allows the government to loosen monetary policy and banks to lend more to companies, according to Beijing Gao Hua Securities Co., Goldman Sachs Group Inc.’s partner in China and the firm with the most correct predictions for yuan-denominated A shares in the two years to January 2012, based on Bloomberg Rankings.
“We remain positive on the market this year,” Wang Hanfeng, China strategist at Gao Hua, said in an e-mailed response to questions. “With inflation easing, there is a shift towards policy loosening which will help improve the liquidity situation and support the valuation expansion of A shares.”
Chongqing Brewery Co. (600132) slumped 6.4 percent to 24.14 yuan. The company won’t apply for further clinical trials of the company’s hepatitis B vaccine and will no longer continue the research of the drug, it said in an exchange statement.
A gauge of ChiNext startup companies rose 1 percent in Shenzhen today, a fourth consecutive advance. Shenzhen Green, a recycler of metal scraps, surged 10 percent to 13.52 yuan. Nanjing CEC Environmental Protection Co. (300172) gained 2.3 percent to 15.46 yuan. Yantai Zhenghai Magnetic Material Co. rose 1.4 percent to 23.35 yuan.
China approved a five-year plan for seven strategic emerging industries including new energy and environment protection, according to a State Council statement today following a meeting presided over by Premier Wen Jiabao. Developing new industries will help maintain economic growth, according to the statement.
Chinese equities traded in New York fell, extending the benchmark index’s loss this month to the largest since September. Technology shares led declines on the Bloomberg China-US Equity Index, which has dropped 12 percent in May.
The iShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., dropped 1.7 percent to $33.29, deepening this month’s slide to 12 percent.
--Zhang Shidong. Editors: Darren Boey, Chan Tien Hin
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at firstname.lastname@example.org
To contact the editor responsible for this story: Darren Boey at email@example.com