China’s Stocks Fall to Five-Month Low on Economic Growth Concern

Jan 06, 2014 2:49 am ET

Jan. 6 (Bloomberg) -- China’s stocks declined, dragging down the benchmark index to its lowest level in five months, amid concern economic growth is slowing while new share sales divert funds from existing equities.

China Railway Group Ltd. plunged the most in more than two months after the company said its president died in an accident. CSR Corp., the nation’s biggest train maker, fell 3.9 percent. China Shenhua Energy Co. dropped 3.5 percent after BNP Paribas SA said coal prices may decrease. Gree Electric Appliances Inc. dropped 3.1 percent, pacing losses by consumer companies.

The Shanghai Composite Index slid 1.8 percent to 2,045.71 at the close, its lowest since Aug. 8. The gauge has slumped 3.3 percent in the first three trading days of 2014, the worst start to a year since 2002, as gauges of manufacturing and services industries fell amid higher money-market rates. The securities regulator approved 11 initial public offerings for Shenzhen over the weekend.

“Economic growth is losing steam,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “Liquidity remains a challenge.”

The CSI 300 Index lost 2.3 percent to 2,238.64. The Hang Seng China Enterprises Index sank 1.4 percent.

A services-industry gauge decreased to 50.9 in December from 52.5 the previous month, according to HSBC Holdings Plc and Markit Economics Ltd. today. An official report last week showed a non-manufacturing gauge fell to a four-month in December, after two measures of factory output slid.

Equity Offerings

China, the world’s largest IPO market in 2010 with a record $71 billion raised, hasn’t had an initial public offering since October 2012 as the securities regulator cracked down on fraud and misconduct among advisers and issuers. Fifty companies are expected to be ready by the end of January, the China Securities Regulatory Commission said Nov. 30 after pledging to move toward a U.S.-style IPO registration system.

A gauge tracking industrial companies tumbled 3.5 percent, the most among the CSI 300’s 10 groups.

China Railway lost 4.2 percent to 2.51 yuan. The company’s operations remain normal and Chairman Li Changjin will assume the president’s responsibilities before a new appointment, according to a company statement. President Bai Zhongren fell from a building on Jan. 4, Wang Mengshu, a deputy chief engineer at the company, said in a phone interview today.

Other rail stocks declined. CSR fell 3.9 percent to 4.73 yuan. Guangshen Railway Co. slid 4.9 percent to 2.53 yuan.

Worst Start

The Shanghai gauge retreated 6.75 percent last year amid concern slowing economic growth will curb profits, and is valued at 7.7 times projected 12-month earnings, the lowest level in at least five years, according to data compiled by Bloomberg. The economy may have expanded 7.6 percent in 2013, the weakest pace in 14 years, according to the State Council.

The index’s decline this year is the biggest since the first three days of 2002, when the measure retreated 3.8 percent. The gauge finished that year with a loss of 18 percent.

The government will release foreign trade and inflation data for December this week. Export growth probably slowed to 5.2 percent from 12.7 percent a month earlier, while inflation probably eased to 2.7 percent from 3 percent, according to Bloomberg surveys of economists.

Shenhua, the nation’s largest coal producer, dropped 3.5 percent to 14.84 yuan. China Coal Energy Co., the second biggest, fell 3.4 percent to 4.51 yuan.

Spot coal prices may extend declines in the near term amid stable inventory at Qinhuangdao Port and rising production in Shanxi province, analysts led by Daisy Zhang wrote in a report last Friday.

Electric Appliances

Consumer discretionary companies retreated 2.8 percent. Gree Electric dropped 3.1 percent to 30.02 yuan. Suning Commerce Group Co., China’s largest electronics retailer, slid 3.8 percent to 9.01 yuan.

Separately, one-year interest rate swaps declined by the most in almost two weeks after the People’s Bank of China said it will keep “moderate liquidity” in the financial system.

One-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, fell eight basis points to 5.23 percent, according to data compiled by Bloomberg. That was the biggest drop since Dec. 24. They touched a record high of 5.38 percent on Jan. 2.

Qunar Cayman Islands Ltd., the Chinese travel-booking website controlled by Baidu Inc., surged 11 percent in New York on Jan. 3 after reporting an increase in travel reservations on mobile devices. Ctrip.com International Ltd., China’s biggest online travel agency, plunged 7.9 percent. The Bloomberg China- US Equity Index fell 1.5 percent.

--Zhang Shidong. Editors: Richard Frost, Michael Patterson