Chinese stocks fell, dragging the benchmark index to the lowest level since February 2009, as Societe Generale SA predicted a weaker growth outlook and Goldman Sachs Group Inc. cut its estimates for Chinese earnings.
China Construction Bank Corp. (939) sank the most in ten weeks as Credit Suisse Group AG warned of softening loan demand and lower net interest margins at lenders. Kweichow Moutai Co. (600519), China’s biggest producer of baijiu liquor by market value, surged the most in almost two years after saying it will raise some product prices. Citic Securities Co. rose to a one-week high on plans to buy a 30 percent stake in Shenzhen Qianhai Equity Exchange.
The Shanghai Composite Index (SHCOMP) closed 0.8 percent lower at 2,043.65, the lowest level since Feb. 2, 2009, even after commentary in the China Securities Journal outlined possible new government stimulus measures. About four stocks fell for each one that rose. The CSI 300 Index (SHSZ300) lost 1.1 percent to 2,204.41. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 0.8 percent.
“There’s not many bright spots in the stock market now,” Zhang Yanbin, an analyst with Zheshang Securities Co. in Shanghai, said by phone today. “The weak economy continues to weigh on investors’ minds. We need more policy loosening for the market to pick up.”
Signs that China’s economic slowdown is deepening have dragged the Shanghai Composite down 8.2 percent this quarter. The gauge sank 2.7 percent in August, a fourth straight month of declines. That’s the longest streak since the five months through August 2004, according to data compiled by Bloomberg.
China’s efforts to stabilize economic growth may rely on exports and domestic consumption, according to a front-page commentary in China Securities Journal today. New stimulus may include raising export tax rebates, subsidizing purchases of goods and fine-tuning monetary policy in the fourth quarter, according to the commentary. Over-reliance on investment as a way to boost the economy should be “corrected,” according to the commentary, written by a reporter at the newspaper named Zhang Zhaohui.
While China will avoid a full-blown hard landing, a shift to a new consumer-led growth model will see structurally weaker growth outlook, according to a report from Societe Generale. The brokerage lowered its forecast for China’s real gross domestic growth to 7.7 percent from 8.1 percent for 2012 and to 7.4 percent from 7.7 percent for 2013.
Goldman Sachs cut its earnings growth estimates for CSI 300 companies for 2012 to 1.2 percent from 3.6 percent and for 2013 to 8 percent from 11.4 percent, strategists Helen Zhu and Timothy Moe wrote in a note to clients dated yesterday. Interim results were “weak” as the slowing economy “clearly weighed on earnings,” the analysts wrote.
Credit Suisse lowered its 12-month target for the Hang Seng China Enterprises Index to 12,000 from 13,000, based on an assumption of flat earnings growth for the next three years, according to a report today. A stock rebound is likely in the next three-to-six months on cheap valuations, the brokerage said. Credit Suisse cut its profit estimates for lenders on lower net interest margins and higher credit costs.
Construction Bank lost 2 percent to 3.90 yuan, the biggest drop since June 25. Bank of Communications Co. sank 1.6 percent to 4.21 yuan. China Minsheng Banking Corp. fell 1.7 percent to 5.68 yuan, the lowest close since Oct. 11.
Citigroup Inc. expects a better Chinese earnings outlook in the second half, citing further policy easing and lower cost pressures, according to a report dated yesterday. Policy makers lowered interest rates in June and July after two reductions in reserve-requirement ratios for lenders this year as the economy expanded at the slowest pace since 2009 in the second quarter.
China’s benchmark money-market rate fell today by the most in six months as the central bank pumped money into the financial system to help ease a cash shortage. The seven-day repo rate, a gauge of interbank funding availability, slid 90 basis points, the most since Feb. 24, to 2.47 percent.
Moutai surged 6.2 percent to 233.43 yuan, the most since Nov. 10, 2010. The company plans to raise factory prices for some products by 20 percent to 30 percent, according to a statement filed to the Shanghai exchange.
Citic Securities (600030) advanced 0.6 percent to 10.58 yuan, the highest close since Aug. 24. The company plans to pay as much as 150 million yuan for the stake in Shenzhen Qianhai Equity Exchange, according to a statement to the Shanghai Stock Exchange.
The Shanghai Composite trades at 9.2 times estimated profit, near the lowest levels since January, according to weekly data compiled by Bloomberg. The measure’s 30-day volatility reading was at 12, compared with this year’s average of 17.1. About 6.1 billion shares changed hands in the gauge yesterday, about 23 percent lower than the daily average this year.
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