China’s stocks slide to lowest since March 2009 as small companies plunge(2)
China’s seven-day repurchase rate, which measures interbank funding availability, rose 51 basis points to 4.51 percent in Shanghai, based on a daily fixing by the National Interbank Funding Center. It reached a five-month high of 5.60 percent on Dec. 30 before sliding 1.60 percentage points yesterday after Premier Wen Jiabao said business conditions may be “relatively difficult” this quarter and monetary policy will be fine-tuned as needed.
Staples Drop
Consumer-staples producers in the CSI 300 slid for a second day, losing 1.6 percent. The stocks were the best performer last year out of the index’s 10 groups as investors bought shares of companies whose earnings can better withstand an economic slowdown. The gauge of consumer staples trades at 16.8 times estimated earnings, compared with 8.9 times for the CSI 300, according to data compiled by Bloomberg.
Kweichow Moutai Co., the biggest maker of baijiu liquor, fell 1.1 percent to 183.15 yuan, adding to yesterday’s 4.2 percent plunge.
“Chinese alcohol companies, one of the biggest winners last year, have relatively high valuations now,” said Zhang Lu, a Shanghai-based analyst at Capital Securities Corp. “Investors are taking profits.”
A gauge of financial companies (SHSZ300) in the CSI 300 rose 0.6 percent today, the only gainer among the industry groups.
Banks Gain
Pudong Development Bank gained 2.9 percent to 8.65 yuan. The lender estimated last year’s net income jumped 42 percent to 27.2 billion yuan ($4.3 billion). China Citic Bank Corp. surged 2.8 percent to 4.10 yuan. China Construction Bank Corp. (601939), the second-largest lender, increased 1.8 percent to 4.58 yuan.
Economists at Barclays Capital and Bank of America Corp. say the central bank will cut lenders’ reserve requirements before the Chinese New Year holiday starts on Jan. 23, the second reduction since 2008. The People’s Bank of China raised reserve requirements six times last year to cool inflation that accelerated to its fastest pace in three years in July.
“I think investors will gain more confidence in the interest-sensitive sector” if borrowing costs and reserve ratios are cut, while liquidity improves, Hugh Simon, chief executive officer of Hamon Investment Group, said on Bloomberg Television today from Hong Kong. He said he was buying Chinese bank shares.
Local Debt
Concerns over the quality of Chinese banks’ assets, the “major share-price driver” of lenders’ stocks last year, will ease, according to Macquarie Group Ltd.
“We believe the macro economy will undergo a soft landing and there will be further monetary loosening in 2012,” Victor Wang and Rachel Li, Hong Kong-based analysts at Macquarie, wrote in a report dated yesterday. “We thus expect asset quality concerns to ease going forward.”
China’s audit office said local governments have cleared up almost half the 531 billion yuan ($84 billion) of debt on their books that an investigation found to have irregularities. The governments and companies they set up to borrow money have resolved 259 billion yuan of bad debt with measures including land sales and the offer of new collateral, according to data released yesterday on the National Audit Office’s website.
