http://www.businessweek.com/news/2011-09-09/chinese-stocks-decline-after-industrial-output-growth-slows.html

Bloomberg News

Chinese Stocks Decline After Industrial Output Growth Slows

September 09, 2011

Sept. 9 (Bloomberg) -- China’s stocks fell, dragging the benchmark index to a second weekly decline, as slowing industrial output growth overshadowed a report showing inflation eased from a three-year high.

Anhui Conch Cement Co., the biggest cement producer, slid to the lowest since January after industrial output rose 13.5 percent in August, compared with economists’ estimate of 13.7 percent. Citic Securities Co. led gains for brokerages on speculation they will benefit from a plan allowing yuan funds in Hong Kong to invest in mainland stocks.

“The inflation controls have curbed industrial growth,” said Richard Chen, a strategist at Jianghai Securities Co. in Shanghai. “This will hurt the outlook for companies’ earnings as tightening measures won’t ease in the near term. Investors are selling into rallies as concerns over the economic slowdown may drag the index lower.”

The Shanghai Composite Index lost 1.2 point, or 0.1 percent, to 2,497.75 at the 3 p.m. close, extending a weekly loss to 1.2 percent. Five stocks declined for every four that rose on the gauge, which climbed as much as 1.2 percent after inflation eased to 6.2 percent in August and some investors speculated U.S. President Barack Obama’s jobs plan will boost economic growth. The CSI 300 Index slid 0.2 percent to 2,751.09. The market is closed Sept. 12 for the Mid-Autumn holiday.

The Shanghai gauge has slumped 11 percent this year as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to tame inflation. It is valued at 11.6 times estimated earnings, compared with a record low of 11.4 set on Sept. 6, according to daily data compiled by Bloomberg.

Industrial Output

Anhui Conch, China’s biggest building material producer, lost 3.1 percent to 18.04 yuan, the lowest level since Jan. 21. The stock declined 18 percent this week. Tangshan Jidong Cement Co. dropped 3.1 percent to 15.46 yuan.

China’s industrial output rose 13.5 percent in August from a year earlier compared with a 14 percent gain the previous month. August retail sales rose 17 percent, matching economists’ estimates compiled by Bloomberg. while January to August fixed- asset investment gained 25 percent, compared with the forecast of 25.2 percent.

The market also lost its gains in the afternoon after Caixin Online reported about 85 percent of Liaoning province’s local government financing vehicles had income insufficient to cove all their debt servicing payments. Caixin cited a government audit report.

“Debt defaults would be a big problem for local governments by curbing investment in infrastructure,” said Chen.

Inflation Eases

China’s consumer prices climbed 6.2 percent from a year earlier, the National Bureau of Statistics said in Beijing. That compared with the 6.2 percent median forecast in a Bloomberg News survey of 31 economists and July’s 6.5 percent gain.

The positive effects of the lower inflation figure should be limited as it was widely expected, Ting Lu, an economist at Bank of America Corp.’s brokerage unit in Hong Kong, said in an e-mailed report today.

“The market had expected a bigger decline in CPI inflation to around 6 percent, but the consensus edged up a bit in the past week on a rebound in pork and vegetable prices,” Lu said.

Citic Securities added 1.4 percent to 12.08 yuan. Haitong Securities Co. advanced 1.3 percent to 7.96 yuan. The central bank may start the Hong Kong trial “soon,” the Xinhua News Agency reported yesterday, citing an unidentified senior official. The total investment quota under the trial will be capped at less than 20 billion yuan, Xinhua cited the official as saying.

Jobs Plan

President Obama called on Congress to pass a jobs plan that would inject $447 billion into the economy through infrastructure spending, subsidies to local governments to stem teacher layoffs, and cutting in half the payroll taxes paid by workers and small-business owners.

The package is heavily geared toward tax cuts, which account for more half the dollar value of the stimulus, and administration officials said believe that will have the greatest appeal to Republican members of Congress.

Obama’s plan “‘may help damp concerns over U.S. economic growth for short term but that’s not strong enough to save the world,” said Mei Luwu, a fund manager at Lion Fund Management Co., which oversees more than $7.8 billion.

--Irene Shen. Editors: Allen Wan, Darren Boey

To contact the reporter on this story: Irene Shen in Shanghai at ishen4@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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