Feb. 13 (Bloomberg) - China's stock-index futures fell, signaling declines for the benchmark index, after new lending grew less than estimated in January and an eastern Chinese city suspended a decision to ease property curbs.
Futures on the CSI 300 Index expiring in February, the most active contract, lost 0.8 percent to 2,509.80 as of 9:17 a.m. local time. China Vanke Co. (000002) and Poly Real Estate Group Co. may decline after Wuhu city said it will shelve a policy to provide housing subsidies. Industrial & Commercial Bank of China Ltd. and China Construction Bank Co. may advance after the China Business News reported the regulator may relax requirements on banks' loan-loss reserves.
"The new lending data and the backpedaling of Wuhu's home subsidy policy mean the magnitude of policy easing is much smaller than expected," said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. "Declines in economic and profit growth are still going on."
The Shanghai Composite Index (SHCOMP) climbed 0.1 percent to 2,351.98 on Jan. 10. The CSI 300 Index rose 0.2 percent to 2,533.62. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 1.2 percent in New York.
The Shanghai index advanced 0.9 percent last week for a fourth weekly gain, its longest winning streak since July 15. The measure has rebounded 6.9 percent this year on speculation the central bank will further cut lenders' reserve-requirement ratios to spur growth. It announced a cut in reserve ratios on Nov. 30, the first reduction since 2008, after boosting them and interest rates last year to cool inflation that accelerated to its fastest pace in three years in July.
Premier Wen Jiabao said the nation should take preemptive measures and start "fine-tuning" its economic policies as early as the first quarter.
'Hostage' to Policy
Economic conditions in January and the first quarter deserve attention, Wen told business executives last week in Beijing as he sought opinions on a government report, the official Xinhua News Agency reported yesterday.
China's A shares may catch up with the rally in global equity markets if the government takes "pre-emptive" policy measures such as a cut in reserve ratios within the next few months, according to Citigroup Inc.
The nation's yuan-denominated shares have been held "hostage" by the government's slower-than-expected policy moves, Minggao Shen and Ben Wei, Citigroup analysts, said in a report dated today. "Unless the Chinese authorities are ready to accept a slower pace of growth, headline easing is drawing near," they said.
Chinese banks extended 738.1 billion yuan ($117 billion) of new yuan-denominated loans last month, the People's Bank of China said on Feb. 10 after the market closed. That compares with the median forecast of 1 trillion yuan in a Bloomberg News survey of 26 economists and 641 billion yuan in December. M2, the broadest measure of money supply, expanded 12.4 percent in January from a year earlier, the lowest in more than a decade. It gained 13.6 percent the previous month.
The China Banking Regulatory Commission may relax requirements on banks' loan-loss reserves, China Business News reported today, without saying where it got the information or providing details. Banks are required to hold 2.5 percent of total lending as reserves for loan losses, the newspaper said.
The mid-sized city of Wuhu in Anhui province will temporarily suspend its home subsidy policy so it can study details on how to implement the rules, according to a statement on the local authority's website yesterday. Wuhu will waive a deed tax and subsidize some home purchases, it said Feb. 9, becoming the first Chinese city this year to signal its intention to ease property curbs.
Hong Kong Discount
Wuhu's reversal shows the stock market has "severely underestimated" the central government's political will to cool the housing market further, Jinsong Du, an analyst at Credit Suisse Group AG, wrote in a note to clients.
China's stocks may trade at a discount to their Hong Kong counterparts for the first time in five years as share transactions drop in Shanghai.
Companies in the Shanghai A-Share Stock Price Index traded at 9.4 times on Feb. 7, compared with 8.5 times for the Hang Seng China Enterprises Index (HSCEI), data compiled by Bloomberg show. That 11 percent premium is the least since February 2007. An average $1.94 billion more shares changed hands daily in Shanghai than securities on the Hong Kong stock exchange the past 100 days, near the lowest level since January 2009.
PetroChina Co. (PTR) traded at the biggest discount to Hong Kong in two months and Chinese stocks in the U.S. slid as lower-than- expected lending and falling imports boosted concern the world's second-largest economy is slowing.
The Bloomberg China-US 55 Index of the most-traded Chinese equities in the U.S. tumbled 1.1 percent to 105.07 in New York on Feb. 10, as all but one stock fell below shares traded in Hong Kong. The 1.3 percent drop last week was the first weekly retreat in two months. Solar module maker Yingli Green Energy Holding Co. (YGE) fell 9.5 percent while Yanzhou Coal Mining Co. (YZC) joined energy producer PetroChina to trade at the biggest discount to Hong Kong since December.
Speculation Chinese policy makers must further loosen monetary policy to spur the economy is mounting, after data released on Feb. 10 showed credit grew less than analysts estimated and imports and exports slumped for the first time in two years.
"The striking thing on the trade data was how weak imports were," Mark Williams, chief Asian economist at Capital Economics Ltd, said by phone from London. "China's economy is still slowing and policy makers have not turned fully in the direction of easing."
'Unsustainable' Solar Rally
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slipped 2.9 percent to $38.93 on Feb. 10, the lowest since Jan. 31. The fund slumped 3.9 percent last week.
The Hang Seng China Enterprises Index in Hong Kong fell 1.7 percent last week. Global stocks declined for the first week in six as concerns that a deal to bail out Greece may fail rattled investors.
Hebei, China-based Yingli led a decline among solar companies, paring its weekly advance to 23 percent.
Mark Bachman, an analyst at Avian Securities LLC -- whose "neutral" outlook for Yingli stock has not yet borne out with the stock up 41 percent this year -- said the rally in the companies' stock is "unsustainable." Trina Solar Ltd. (TSL), a Changzhou-based maker of solar panels, lost 7.3 percent to $10.15 on Friday, cutting its weekly advance to 24 percent. Bachman also rates Trina's stock "neutral."
'100 Percent of Utilization'
There has been no uptick in solar companies' production targets and factories aren't running at full capacity, Bachman said in an interview on Feb. 10, citing conversations with company officials in China.
"Every one of these companies coming out of China is likely to produce losses all the way through 2012,' he said.
Deutsche Bank AG's Vishal Shah, a managing director based in New York, wrote in a Feb. 9 report that for "tier-one" solar companies in China, Taiwan and Korea, orders have been rising and they are "running at 100 percent of utilization."
ADRs of PetroChina, the nation's biggest oil producer, declined 3.4 percent to $146.63 on Feb. 10, widening the discount to Hong Kong to 1.6 percent, the most since Dec. 8. The U.S.-traded stocks slid 1.9 percent last week.
Cnooc, China's biggest offshore energy producer, fell 1.9 percent to $221.41 in New York, paring its weekly gain to 1.4 percent, after its Hong Kong shares slipped 1 percent to HK$17.28, or $2.23. One American depositary receipt is the equivalent of 100 ordinary shares. The 0.6 percent discount was the widest since Feb. 2.
European Crisis 'Staggers On'
Yanzhou Coal, China's fourth-biggest producer of the fuel, slipped 4.6 percent to $24.40, bringing its decline to 0.5 percent last week. The company's Hong Kong shares fell 3 percent to HK$19.30, or $2.49, leaving the ADRs, worth 10 ordinary shares, to trade at a 2 percent discount, the cheapest since Dec. 28.
Chinese economic data for January can be difficult to interpret because the Lunar New Year holiday closed many businesses in the last week of the month, Capital Economics' Williams said. The holiday usually falls during February, complicating year-over-year comparisons, he said.
The People's Bank of China lowered the amount banks are required to keep in reserve for the first time since 2008 in December and hasn't altered the nation's 6.56 percent lending rate since July. The International Monetary Fund said in a report this week that China's economic expansion may be cut almost in half should Europe's debt crisis worsen.
"As the European crisis staggers on with no firm resolution in sight, I think it will be fair to expect Chinese policy makers to start wondering whether they should do a little bit more," Williams said.