China’s stocks drop for fifth day on property slowdown concerns

Nov. 22 (Bloomberg) -- China’s stocks fell, sending the benchmark index to a fifth day of losses, amid concern declining property investment and slowing overseas demand for exports will hurt the nation’s economic growth.

Building-material makers Anhui Conch Cement Co. and Baoshan Iron & Steel Co. lost at least 1 percent after Citigroup Inc. said property investment may be cut back “significantly.” China Vanke Co. sank to a one-month low. Jiangxi Copper Co. and Zhuzhou Smelter Group Co., China’s biggest producers of copper and zinc, fell as metal prices slid.

“Slowing property investment in China is a big threat to economic growth next year, given the proportion of the property industry to China’s gross domestic product,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

The Shanghai Composite Index dropped 18.40 points, or 0.8 percent, to 2,396.95 as of 1:26 p.m. local time, extending a four-day, 4.5 percent slump. The CSI 300 Index fell 0.7 percent to 2,590.51. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 2.4 percent yesterday.

The Shanghai Composite has fallen 15 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio to curb inflation that’s near a three-year high. It’s valued at 11.4 times estimated earnings, compared with a record low of 10.8 times on Oct. 21, according to weekly data compiled by Bloomberg.

Vice Premier Wang Qishan said this week he is certain that a global economic recession triggered by the financial crisis will be long term, Xinhua News Agency reported.

Property, Exports

A gauge tracking material producers on the CSI 300 sank 1.5 percent, the third-most among the 10 industry groups. Anhui Conch, China’s biggest cement maker, slid 1.2 percent to 17.01 yuan. Baoshan Steel, the listed unit of China’s second-biggest steelmaker, dropped 1 percent to 5.05 yuan.

If tightening measures aren’t relaxed, property investment will “scale back significantly” in the next two quarters, “dragging down the whole production chain and GDP growth,” Minggao Shen and Ben Wei, analysts at Citigroup, wrote in a report dated yesterday. Exporting firms are also facing an environment worse than in late 2008 due to the overseas slowdown and rising costs, they said.

A gauge of property stocks on the Shanghai Composite retreated 0.8 percent. Vanke fell 0.6 percent to 7.05 yuan. Poly Real Estate Group Co., China’s second-largest developer by market value, lost 1.6 percent to 8.99 yuan.

Sales Volumes

Home transaction volumes declined 39 percent in October from a year earlier in the 15 biggest cities, according to government data, the Financial Times said. The China Banking Regulatory Commission told banks in April to measure the effects of a 30 percent decline in transactions in tests to check the strength of the financial system, the report said, citing regulatory documents.

Jiangxi Copper fell 1.8 percent to 25.67 yuan. Tongling Nonferrous Metals Group Co., China’s second-biggest copper producer, retreated 1.8 percent to 19.05 yuan. Zhuzhou Smelter lost 2.4 percent to 11.66 yuan. Copper futures for March delivery dropped 3 percent in New York yesterday and oil slid 0.5 percent.

In the U.S., the deficit-cutting congressional supercommittee said that it failed to reach an agreement, setting the stage for $1.2 trillion automatic spending cuts in 2013 and fueling concern that economic-stimulus measures that are set to expire will not be renewed.

China Risks

France’s rising financing costs are increasing the nation’s fiscal challenges, according to report issued by Moody’s Investors Service. Germany’s Finance Ministry said the country’s expansion is “noticeably slower” this quarter.

China’s main risks to growth are slowing expansion in advanced economies and a cooling property market, slowing infrastructure investment, local government debts and rapid credit growth over the past two years, said Bert Hofman, World Bank’s chief economist for the East Asia and Pacific Region.

Still, risks in China’s financial system are “manageable” as officials are “on top” of the issues, he said at a press briefing in Beijing today.

Airlines fell after Shanghai International Airport Co., operator of China’s second-busiest airfield, said passenger numbers declined 3.7 percent last month from a year earlier.

Air China Ltd., the nation’s largest international carrier, slid 6.3 percent to 7.18 yuan, set for the lowest close since August 2009. China Southern Airlines Co., the biggest by fleet size, fell 2.2 percent to 5.77 yuan.

Consumer Stocks

Kweichow Moutai Co. led gains by consumer stocks after Shenyin & Wanguo Securities Co. said the biggest Chinese liquor maker may raise product prices and consumer companies are good bets amid an economic slowdown.

Moutai advanced 1.8 percent to 204.40 yuan, set for the biggest gain in a month. Wuliangye Yibin Co., China’s second- biggest maker of white liquor by market value, rose 2.5 percent to 36.68 yuan. Yantai Changyu Pioneer Wine Co., the listed unit of the country’s biggest vintner, added 2.2 percent to 115.30 yuan.

Moutai is likely to raise prices by as much as 33 percent within three months and earnings forecasts for other liquor makers may be lifted, Tong Xun, an analyst at Shenyin & Wanguo, wrote in a report today.

Solar companies including Suntech Power Holdings Co. and Trina Solar Ltd. led declines by Chinese stocks traded in the U.S. before third-quarter earnings reports this week that analysts forecast will show net losses.

Muddy Waters

Digital advertising company Focus Media Holdings Ltd. plunged as much as 66 percent after Muddy Waters LLC, which is known for having predicted Sino-Forest Corp.’s retreat, recommended betting against the Shanghai-based company.

China’s money-market rate rose for a sixth day on speculation waning inflows into the financial system will curb the availability of cash.

Financial institutions’ yuan holdings dropped a net 24.9 billion yuan ($3.9 billion) in October following inflows of 247.3 billion yuan in September, according to a statement on the People’s Bank of China website yesterday. Economists watch the numbers for signs of inflows or outflows of so-called hot money.