Most Chinese stocks fell after a government report today showed the nation’s economy grew at the slowest pace in three years in the second quarter.
The Shanghai Composite Index (SHCOMP) changed directions at least 10 times before closing up less than 0.1 percent to 2,185.90, as five stocks dropped for every two that rose. The measure slid 1.7 percent this week, a fourth week of losses, as a statistics bureau report showed gross domestic product expanded 7.6 percent, compared with analysts’ estimate for 7.7 percent. Industrial production also increased at a slower pace in June while retail sales growth decelerated.
“The GDP figure might not be good, but most of the economic weakness has been priced into stocks,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “The stock market’s performance may be better in the second half as it’ll reflect a slew of government easing policies such as interest-rate cuts.”
China Shenhua Energy Co., the biggest coal producer, slid 0.8 percent after Sanford C. Bernstein cut its 2012 and 2013 price forecast for thermal coal. China Merchants Bank Co. (600036) and China Minsheng Banking Corp. paced gains by financial companies after new lending exceeded estimates last month.
The CSI 300 Index (SHSZ300) gained 0.1 percent to 2,450.63 today. The Shanghai Composite has fallen 0.6 percent this year on concern Europe’s debt crisis and China’s property curbs are hurting economic growth. The index is valued at 9.7 times estimated profit, compared with a record low of 8.9 times recorded in January, data compiled by Bloomberg show. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, slid 1.6 percent yesterday.
China’s growth slowed for a sixth quarter as trade and manufacturing decelerated, putting pressure on Premier Wen Jiabao to boost stimulus to secure a second-half economic rebound. Import and export growth slowed in June and consumer prices rose the least in more than two years, according to data released by the statistics bureau this week.
Jiangxi Copper Co., China’s biggest producer of the metal, lost 1.4 percent to 23.26 yuan. Yunnan Copper Industry Co., the fourth largest, fell 1.7 percent to 18.81 yuan.
Copper traders are the most bearish in six weeks on concern demand will slow in China, Europe and the U.S. at a time when hedge funds are betting on lower prices. Thirteen analysts surveyed by Bloomberg said they expect prices to drop next week and nine were bullish. A further six were neutral, making the proportion of bears the highest since June 1.
“The question is not how deep the economy falls, but how long it will stay low,” said Dong Tao, Credit Suisse Group AG’s Hong Kong-based chief China economist. “China needs structural reforms, not just monetary or fiscal expansion.”
Shenhua Energy fell 0.8 percent to 22.63 yuan. China Coal Energy Co., the second biggest, dropped 0.8 percent to 7.77 yuan. Datong Coal Industry Co. (601001), the third largest, lost 1 percent to 10.69 yuan.
Bernstein lowered its China coal price forecast for this year by 4.8 percent to 700 yuan ($109.8) a metric ton and the projection for 2013 by 2.3 percent to 650 yuan. It’s the third time that Bernstein has cut its forecast for the China prices in two months.
Merchants Bank gained 0.8 percent to 10.17 yuan. Minsheng Banking, the nation’s first privately owned bank, added 1.4 percent to 5.97 yuan.
Chinese banks extended 919.8 billion yuan of new loans in June, the People’s Bank of China said yesterday after the market closed. That compares with the 880 billion yuan median forecast in a Bloomberg News survey and 793.2 billion yuan in May. M2, a measure of money supply, rose 13.6 percent from 13.2 percent a month earlier, it said.
The monetary data “shows the initial effects of the monetary easing undertaken in recent months,” Michael Shaoul, chairman of Marketfield Asset Management in New York, wrote in a note yesterday. “We very much doubt that liquidity conditions have improved further down the food chain.”
Anhui Conch Cement Co. led a rally among building-material makers after China’s home sales rose the most this year last month, boosting speculation construction activities will accelerate. The stock gained 1.2 percent to 14.87 yuan.
Huaxin Cement Co. (600801), the Chinese affiliate of Holcim Ltd., rose 1.5 percent to 11.84 yuan. Gansu Qilianshan Cement Group Co. climbed 2.1 percent to 10.72 yuan.
The value of homes sold climbed to 531.3 billion yuan from 375.7 billion yuan in May, based on the difference between the National Statistics Bureau’s data for the first half of the year and the first five months.
The central bank may cut interest rates one or two more times this year and reduce the reserve-requirement ratio two or three more times in 2012, the China Daily reported today, citing Zhu Baoliang, chief economist at the State Information Center. The government cut rates on July 5 for a second time in a month and has lowered the reserve ratio three times since November to bolster growth.
--Zhang Shidong. With assistance from Belinda Cao in New York. Editors: Allen Wan, Richard Frost
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