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China’s stocks fell for the fourth time in five days as concern Spain’s bailout plan won’t be enough to tame Europe’s debt crisis overshadowed higher-than- estimated new Chinese bank loans.
Baoshan Iron & Steel Co. (600019), the listed unit of China’s second-biggest steelmaker, declined 3.3 percent after it cut product prices. China Shenhua Energy Co., the largest coal producer, led a gauge of energy producers to the biggest drop among industry groups on concern Europe’s economic problems may slow global growth. Spanish and Italian bond yields surged yesterday as investors turned their attention to debt auctions in Italy this week and elections on June 17 that may determine whether Greece stays in the euro.
“The European debt crisis is the biggest risk to the stock market now and will cut investors’ risk appetite,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “It looks like the problem is spreading to bigger countries such as Spain and Italy, which is the last thing investors want to see.”
The Shanghai Composite Index (SHCOMP) dropped 16.07 points, or 0.7 percent, to 2,289.79 at the close, with 30-day volatility at 14.73, the lowest since June 1. The CSI 300 Index (SHSZ300) fell 0.7 percent to 2,540.18. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 0.3 percent in New York yesterday.
Even with today’s drop, the Shanghai index has advanced 4.1 percent this year on expectations the government will increase spending on infrastructure and ease monetary policies to spur growth. Stocks in the measure are valued at 9.91 times estimated earnings, compared with the five-year average of 17.8, according to weekly data compiled by Bloomberg.
The Shanghai Composite gained the most in almost two weeks yesterday after China’s trade expanded more than economists estimated in May and inflation slowed. About 6.5 billion shares changed hands in the Shanghai Composite yesterday, 27 percent lower than the daily average this year.
BNP Paribas cut its estimates for Chinese bank profits and margins after China lowered interest rates last week. Lenders will be able to offer deposit rates by up to 10 percent more than the benchmark, analyst Dorris Chen wrote in a note dated yesterday. Profit estimates were cut by an average of 1.3 percent for 2012 and 6.1 percent for 2013, Chen wrote.
China Construction Bank Corp. (601939), the country’s second-largest bank, slid 0.7 percent to 4.42 yuan. Bank of China Ltd. dropped 0.3 percent to 3.01 yuan. China Merchants Bank Co. retreated 1.3 percent to 10.81 yuan.
Local-currency loans were 793.2 billion yuan ($125 billion), the People’s Bank of China said yesterday. That compared with the 700 billion yuan median forecast in a Bloomberg News survey of 29 economists and 681.8 billion yuan in April. M2 money supply grew 13.2 percent last month from a year earlier, compared with an estimate of 12.9 percent.
The loan data bolstered the outlook for developers, which jumped 1.8 percent as a group on the Shanghai Composite. Poly Real Estate Group Co. (600048), the second-biggest developer, climbed 4 percent to 14.63 yuan. Gemdale Corp., the fourth largest, gained 3.1 percent to 7.27 yuan. Financial Street Holding Co. added 2.8 percent to 6.96 yuan.
Guangdong Huaxing Bank is studying plans to offer a 30 percent discount off the benchmark interest rate on loans to first-home buyers, the Guangzhou Daily reported today, citing the lender. Some large banks this week may start offering as much as a 20 percent discount of the benchmark interest rate on loans to first-home buyers, the newspaper said.
The MSCI Asia Pacific Index (MXAP) dropped 0.7 percent today. Spain’s 10-year bond yield climbed the most in almost a month yesterday as optimism faded that the nation’s 100 billion euro ($125 billion) bank bailout will stop Europe’s debt crisis from spreading. Greece is scheduled to have an election on June 17, which will decide if the nation will stay in the euro zone.
Baoshan Steel dropped 3.3 percent to 4.43 yuan. Prices were cut by as much as 400 yuan a metric ton for July delivery, with most hot-rolled and cold-rolled products reduced by 200 yuan a ton, the company said. Hebei Iron & Steel Co., the listed unit of China’s biggest steelmaker, lost 2 percent to 2.88 yuan. Angang Steel Co. slid 1 percent to 4 yuan.
A measure of energy stocks in the CSI 300 tumbled 2.1 percent today, the most among the 10 industry groups. Shenhua, the nation’s largest coal producer, declined 2.4 percent to 23.59 yuan. China Coal Energy Co., the second biggest, fell 1.9 percent to 8.38 yuan. Datong Coal Industry Co. (601001), the third largest, lost 2.2 percent to 11.99 yuan.
Societe Generale SA reduced its 2012 coal-price forecasts because of the “poor performance” in the global economy and a slowdown in energy demand in emerging markets. It cut its forecast for average 2012 CIF ARA coal to $109.70 a metric ton from $113.80.
Chinese stocks traded in the U.S. fell, led by Ctrip.com International Ltd. The slump in the Bloomberg China stock measure erased its gains this year for a 0.1 percent loss. The iShares FTSE China 25 Index Fund (FXI), the biggest U.S.-listed China exchange-traded fund, dipped 0.1 percent to $32.79 in its second day of declines.
The central bank cut benchmark interest rates last week for the first time since 2008 after the economy expanded at the slowest pace in 11 quarters in the January-March period, and May consumer prices rose the least in two years. May exports and import growth topped estimates, data showed on June 10.
“There’s a lot weighing on investors’ minds beside Chinese growth figures, even though the import and export numbers were positive,” Christopher Palmer, who helps manage $2.5 billion of assets as London-based director of global emerging markets for Henderson Global Investors Ltd., said by phone yesterday. “Investors are still hesitant to commit to China having been told that things were OK in Europe, which is its biggest trading partner, and now finding out that Spain needs a bailout.”
--Zhang Shidong. Editors: Allen Wan, 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