Feb. 17 - China’s stocks fell, narrowing this week’s gains, on concern a jump in money-market rates will make it costly for small companies to borrow money and a state economist predicted the government will set the lowest economic growth target in eight years.
China Vanke Co., the largest property developer, slid 0.8 percent after the Economic Information Daily quoted a housing official as saying the government will keep property curbs in place for the long term. Jiangxi Copper Co. and Yunnan Aluminium Co. led declines for metal producers after Fan Jianping said Premier Wen Jiabao may announce a 7 percent or 7.5 percent target for economic growth this year. China Life Insurance Co., the biggest insurer, gained 1.7 percent after premium income rose 12 percent in January.
The Shanghai Composite Index (SHCOMP) slipped 3.3 points, or 0.1 percent, to 2,353.51 as of the 11:30 a.m. local time break, paring this week’s gain to 0.1 percent. The CSI 300 Index fell 0.1 percent to 2,532.58. The CSI Smallcap 500 Index declined 0.8 percent, the most since Feb. 7.
“We are very concerned” about China’s economy, Peter Chiappinelli, a portfolio strategist for asset allocation at Boston-based Grantham, Mayo, Van Otterloo & Co., said at the Bloomberg Link Portfolio Manager Mash-Up Conference in New York.
The Shanghai Composite is poised for a fifth week of gains, the longest win streak since Nvember 2010. It has rebounded 9.5 percent from a Jan. 5 low on speculation the central bank will 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.
No Rate Cut
China may set a lower annual growth target at the annual National People’s Congress meetings in March as authorities place less emphasis on the pace of expansion and the global economy remains weak, Fan, the head of the Economic Forecasting Department at the center which is controlled by China’s top economic planning agency, said in an interview yesterday.
Jiangxi Copper, the biggest producer of the metal, lost 0.5 percent to 26.38 yuan. Yunnan Aluminium fell 1.5 percent to 5.85 yuan. China Shenhua Energy Co., the biggest coal producer, declined 0.7 percent to 27.09 yuan.
Fan said he doesn’t expect the central bank to lower the reserve requirement ratio for commercial lenders in the first quarter. A cut in interest rates is “not very likely” this year because real deposit rates continue to be negative, he said.
‘Mother’ of All Bubbles
The seven-day repurchase rate, a gauge of funding availability in the financial system, increased 70 basis points, or 0.70 percentage point, to 5.07 percent as of 10:17 a.m. Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That’s the highest level since Jan. 19. It jumped 143 basis points this week, the most this year. Smallcaps led declines in Chinese markets, with the Shenzhen Composite Index dropping 0.7 percent and the ChiNext index (SZ399006) of start-up companies slumping 1.2 percent.
China’s housing market is experiencing the “mother” of all bubbles, and a property slump will hurt everything from Australian mining firms to Europe’s luxury-goods makers, said Chiappinelli.
An index tracking housing developers in the Shanghai stock exchange fell 0.4 percent today. China Vanke slid 0.8 percent to 7.73 yuan. Gemdale Corp. declined 1.5 percent to 5.26 yuan.
The property gauge slumped 18 percent last year as the government limited mortgages and restricted home purchases to rein in home prices that increased in the previous two years. The cooling market helped slow gross domestic product growth in 2011 to 9.2 percent, matching the smallest expansion since 2002.
China will “unwaveringly” maintain property curbs in both the long and short term, Economic Information Daily quoted Qin Hong, head of the policy research center under the Ministry of Housing and Urban-Rural Development, as saying.
Local governments will face “relatively large” fiscal pressure this year because of public housing investment and debt repayment, according to Qin.
China Life rose 1.7 percent to 18.58 yuan after it said last month’s premium income increased to 49.1 billion yuan ($7.8 billion) from 43.9 billion yuan a year ago.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., rose to a one-week high as China Mobile Ltd. and Cnooc Ltd. jumped on speculation of more monetary easing.
China may cut banks’ reserve requirements three more times in the first half, after the central bank said this week it is targeting greater growth in money supply in 2012, HSBC Holdings Plc economists said in a report e-mailed yesterday.