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China's Stocks Decline Most in Week on Economic Outlook, European Concerns

Data Analysis 01:41:05PM Feb 14, 2012 Source:SMM

Feb 14 (Bloomberg) - China’s stocks fell the most in a week after Moody’s Investors Service cut the debt ratings of six European nations and a former central bank official said the government is unlikely to significantly loosen credit this year.

Jiangxi Copper Co. (600362) and Western Mining Co. led a decline for commodity producers on concern the European debt crisis will curb demand for metals. Shanghai Pudong Development Bank Co. and China Vanke Co. slid at least 1.3 percent, pacing a retreat for financial stocks, on speculation tight credit will hurt profit.

The Moody’s downgrade is “not new but the timing is quite surprising,” Andy Mantel, founder and chief executive officer of Pacific Sun Advisors, said in an interview with Bloomberg Television today from Hong Kong. “You’ll see a bit negative shock for Asian markets as a whole.”

The Shanghai Composite Index (SHCOMP) dropped 15.6 points, or 0.7 percent, to 2,336.21 at 1:20 p.m., its biggest loss since Feb. 7. The CSI 300 Index lost 0.8 percent to 2,511.74. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, rose 1.6 percent yesterday in New York.

The Shanghai Composite has rebounded 6.2 percent this year on speculation the central bank will further cut lenders’ reserve-requirement ratios to spur growth. It announced a reduction in reserve ratios on Nov. 30, the first since 2008, after boosting them and interest rates last year to cool inflation that accelerated to its fastest pace in three years in July.

European Downgrades
A measure of material stocks in the CSI 300 slid 1 percent today, the second most among the 10 industry groups. Jiangxi Copper, China’s biggest producer of the metal, fell 1.3 percent to 26.14 yuan. Western Mining, the nation’s fourth-largest maker of zinc concentrate, dropped 1.2 percent to 10.56 yuan. Yunnan Aluminium Co. (000807), the country’s fifth-largest producer of the light metal, retreated 1.9 percent to 5.77 yuan.

Spain was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2 with a negative outlook, Moody’s said. The agency also revised its outlook on the U.K.’s and France’s top Aaa rating to “negative.”

Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

Pudong Bank, the Chinese partner of Citigroup Inc., slid 1.3 percent to 9.15 yuan. Bank of Communications Ltd., part- owned by HSBC Holdings Plc, dropped 0.8 percent to 4.85 yuan. Vanke, the nation’s biggest listed property developer, fell 1.6 percent to 7.58 yuan. Poly Real Estate Group Co. (600048), the second largest, slipped 0.7 percent to 10.50 yuan.

No Significant Loosening
The government is unlikely to significantly loosen credit this year if the economy faces difficulties, Wu Xiaoling, former deputy governor of the central bank, said at a forum in Beijing yesterday. Economic growth is set to slow this year as a result of weakening external demand, Xia Bin, an adviser to the central bank, said yesterday.

“With growth replacing inflation at the top of Beijing’s policy agenda, we believe both monetary and fiscal policies are set to ease further to support infrastructure, public housing and water resource projects,” Qu Hongbin and Sun Junwei, China economists at HSBC, said in a report.

Inflation could ease to below 4 percent for the first time in 17 months in February and the full-year rate will see a “clear deceleration” from 2011, an official with the nation’s top economic planning agency said.

Slowing Inflation
Consumer-price (CNCPIYOY) gains in February will see a “marked” decline due to a drop in food costs and comparatively high prices in the same month last year, Zhou Wangjun, vice director of the pricing department at the National Development and Reform Commission, said in a webcast with the Xinhua News Agency yesterday. Consumer prices rose 4.5 percent last month as food prices rebounded amid the Chinese new year.

Most Chinese stocks climbed yesterday after Premier Wen Jiabao said the nation needs to start “fine-tuning” economic policies this quarter, fueling speculation the government will soon ease policy to preserve growth in the world’s second- biggest economy. New lending missed estimates by 26 percent in January and money supply grew the least in more than a decade, according to data released by the central bank on Feb. 10 after the market closed.

‘Break Out’
China’s A shares are poised to “break out” based on technical signals, according to Macquarie Group Ltd. The CSI 300 has advanced the past four weeks.

“We are seeing possible signs of a sustainable rebound here,” Jiong Shao, head of China strategy at Macquarie, said in a report. The CSI 300 “appeared to have broken out of a down trend which lasted over a year” with the Relative Strength Index “solidly in the bullish zone in the last four weeks. While we may need another week or two to conclude, the break-out signs are getting too hard to ignore.”

Huayi Brothers Media Corp., China’s biggest listed filmmaker, advanced 1.1 percent to 14.43 yuan after the government told its television broadcasters to limit the number of imported series they show.

The State Administration of Radio, Film and Television issued rules barring all foreign TV series from the prime-time hours of 7 p.m. to 10 p.m. and restricting overseas-made shows to no more than 25 percent of total programming time each day.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced for the first time in three days, increasing 1.3 percent to $39.42.

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China's Stocks Decline Most in Week on Economic Outlook, European Concerns

Data Analysis 01:41:05PM Feb 14, 2012 Source:SMM

Feb 14 (Bloomberg) - China’s stocks fell the most in a week after Moody’s Investors Service cut the debt ratings of six European nations and a former central bank official said the government is unlikely to significantly loosen credit this year.

Jiangxi Copper Co. (600362) and Western Mining Co. led a decline for commodity producers on concern the European debt crisis will curb demand for metals. Shanghai Pudong Development Bank Co. and China Vanke Co. slid at least 1.3 percent, pacing a retreat for financial stocks, on speculation tight credit will hurt profit.

The Moody’s downgrade is “not new but the timing is quite surprising,” Andy Mantel, founder and chief executive officer of Pacific Sun Advisors, said in an interview with Bloomberg Television today from Hong Kong. “You’ll see a bit negative shock for Asian markets as a whole.”

The Shanghai Composite Index (SHCOMP) dropped 15.6 points, or 0.7 percent, to 2,336.21 at 1:20 p.m., its biggest loss since Feb. 7. The CSI 300 Index lost 0.8 percent to 2,511.74. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, rose 1.6 percent yesterday in New York.

The Shanghai Composite has rebounded 6.2 percent this year on speculation the central bank will further cut lenders’ reserve-requirement ratios to spur growth. It announced a reduction in reserve ratios on Nov. 30, the first since 2008, after boosting them and interest rates last year to cool inflation that accelerated to its fastest pace in three years in July.

European Downgrades
A measure of material stocks in the CSI 300 slid 1 percent today, the second most among the 10 industry groups. Jiangxi Copper, China’s biggest producer of the metal, fell 1.3 percent to 26.14 yuan. Western Mining, the nation’s fourth-largest maker of zinc concentrate, dropped 1.2 percent to 10.56 yuan. Yunnan Aluminium Co. (000807), the country’s fifth-largest producer of the light metal, retreated 1.9 percent to 5.77 yuan.

Spain was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2 with a negative outlook, Moody’s said. The agency also revised its outlook on the U.K.’s and France’s top Aaa rating to “negative.”

Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

Pudong Bank, the Chinese partner of Citigroup Inc., slid 1.3 percent to 9.15 yuan. Bank of Communications Ltd., part- owned by HSBC Holdings Plc, dropped 0.8 percent to 4.85 yuan. Vanke, the nation’s biggest listed property developer, fell 1.6 percent to 7.58 yuan. Poly Real Estate Group Co. (600048), the second largest, slipped 0.7 percent to 10.50 yuan.

No Significant Loosening
The government is unlikely to significantly loosen credit this year if the economy faces difficulties, Wu Xiaoling, former deputy governor of the central bank, said at a forum in Beijing yesterday. Economic growth is set to slow this year as a result of weakening external demand, Xia Bin, an adviser to the central bank, said yesterday.

“With growth replacing inflation at the top of Beijing’s policy agenda, we believe both monetary and fiscal policies are set to ease further to support infrastructure, public housing and water resource projects,” Qu Hongbin and Sun Junwei, China economists at HSBC, said in a report.

Inflation could ease to below 4 percent for the first time in 17 months in February and the full-year rate will see a “clear deceleration” from 2011, an official with the nation’s top economic planning agency said.

Slowing Inflation
Consumer-price (CNCPIYOY) gains in February will see a “marked” decline due to a drop in food costs and comparatively high prices in the same month last year, Zhou Wangjun, vice director of the pricing department at the National Development and Reform Commission, said in a webcast with the Xinhua News Agency yesterday. Consumer prices rose 4.5 percent last month as food prices rebounded amid the Chinese new year.

Most Chinese stocks climbed yesterday after Premier Wen Jiabao said the nation needs to start “fine-tuning” economic policies this quarter, fueling speculation the government will soon ease policy to preserve growth in the world’s second- biggest economy. New lending missed estimates by 26 percent in January and money supply grew the least in more than a decade, according to data released by the central bank on Feb. 10 after the market closed.

‘Break Out’
China’s A shares are poised to “break out” based on technical signals, according to Macquarie Group Ltd. The CSI 300 has advanced the past four weeks.

“We are seeing possible signs of a sustainable rebound here,” Jiong Shao, head of China strategy at Macquarie, said in a report. The CSI 300 “appeared to have broken out of a down trend which lasted over a year” with the Relative Strength Index “solidly in the bullish zone in the last four weeks. While we may need another week or two to conclude, the break-out signs are getting too hard to ignore.”

Huayi Brothers Media Corp., China’s biggest listed filmmaker, advanced 1.1 percent to 14.43 yuan after the government told its television broadcasters to limit the number of imported series they show.

The State Administration of Radio, Film and Television issued rules barring all foreign TV series from the prime-time hours of 7 p.m. to 10 p.m. and restricting overseas-made shows to no more than 25 percent of total programming time each day.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced for the first time in three days, increasing 1.3 percent to $39.42.