Mar. 28 (Bloomberg) -- China’s stocks fell to a seven-week low after some of the nation’s largest metals producers reported slumping earnings, boosting concern slowing economic growth and tight monetary policies are hurting profits.
Jiangxi Copper Co. (600362), the nation’s biggest producer of the metal, declined 3 percent after reporting an 18 percent slide in net income. Angang Steel Co. dropped to the lowest in two months after posting a wider second-half loss on waning demand and high raw-material costs. Anhui Conch Cement Co Ltd., the largest cement producer, lost 1.2 percent after the Hong Kong-traded stock was cut to hold at Citic Securities Co.
“Investors had expected earnings to be weak but they are still below expectations so stocks are falling,” said Larry Wan, Beijing-based head of investment at Union Life Asset Management Co., which manages the equivalent of $2.2 billion. “Moreover, shares have already risen quite a bit this year on monetary easing expectations.”
The Shanghai Composite Index (SHCOMP) fell 14 points, or 0.6 percent, to 2,333.24 at 9:43 a.m. local time. The CSI 300 Index (SHSZ300) declined 0.5 percent to 2,534.66, led by material producers. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, lost 0.3 percent to 105.42 yesterday.
About 6.5 billion shares changed hands in the Shanghai Composite yesterday, or 18 percent lower than the daily average this year, while 30-day volatility in the gauge was at 15, comnpared with this year’s low of 14.8 on March 12, according to data compiled by Bloomberg.
No Profit Growth
The Shanghai Composite has advanced 6.1 percent this quarter, the biggest three-month gain since the third quarter of 2010, on speculation the government will take measures to boost economic growth. Stocks in the measure trade at 9.7 times estimated profit, compared with a record low of 8.9 times on Jan. 6, weekly data compiled by Bloomberg showed.
Industrial companies posted their first January-February profit decline since 2009, as net income dropped 5.2 percent from a year earlier to 606 billion yuan ($96 billion), the National Bureau of Statistics said on its website yesterday. That compared with a 34.3 percent gain in the first two months of 2011
Chinese corporate profits won’t grow at all this year, according to Societe Generale SA. The industrial profit figures suggest 2012 consensus earnings estimates for Hong Kong-listed Chinese companies are “far too optimistic,” Societe Generale strategists Guy Stear and Anthony Lee wrote in a note to clients dated yesterday.
Metal Stocks Drop
A gauge of material producers in the CSI 300 fell 1.7 percent, the most among 10 industry groups. Jiangxi Copper, whose shares also trade in Hong Kong, plunged 3 percent to 25.35 yuan after it reported net income of 2.27 billion yuan ($360 million) in the six months ended Dec. 31, compared with 2.79 billion yuan a year earlier, according to Bloomberg calculations. The profit trailed the 3.04 billion yuan median estimate of 15 analysts surveyed by Bloomberg.
Angang Steel slid 0.7 percent to 4.50 yen after it posted a net loss of 1.93 billion yuan in the six months ended Dec. 31, compared with a loss of 713 million yuan a year earlier, according to Bloomberg calculations based on Angang Steel’s full-year earnings posted in Shenzhen yesterday.
China’s steelmakers, the biggest in the world, incurred an industrywide loss in the fourth quarter as high raw material costs and competition weighed on prices, the nation’s steel association said. Profit margins for mills fell to a record low of 0.43 percent in November as housing curbs and the withdrawal of stimulus measures for the automobile industry curbed demand.
Anhui Conch fell 1.2 percent to 15.82 yuan after the Hong Kong-listed shares were downgraded from overweight by Citic analyst Timothy Lee with a six-month target price of HK$22.90 per share. The Hong Kong shares fell 1.2 percent to HK$23.90.
Aberdeen Asset Management Plc is underweight on China on concern about the nation’s non-performing loans, Assistant Investment Manager Pruksa Iamthongthong said in an interview. Aberdeen doesn’t own any shares in the four largest banks in China, according to Iamthongthong.
Chinese residential developers may face a survival test this year, especially smaller players that leveraged to buy land and would now need to cut prices in order to replenish balance sheets, Iamthongthong said.
LDK Solar Co., a solar wafer producer based in Xinyu in Jiangxi province, slid 5.4 percent to $4.24 in New York, the biggest daily drop since March 21. Trina Solar Ltd., China’s fifth-largest solar-panel supplier based in Changzhou in the eastern Jiangsu province, lost 2.7 percent to $7.44, the lowest level since March 12. Suntech Power Holdings Co., the world’s largest solar-panel maker, sank 1.6 percent to a two-week low of $3.05.
The cost of photovoltaic subsidies in Italy is higher than Citigroup had estimated, Arcuri said, citing the Italian energy document. The plan indicates “a significant slowdown in the market, and the ongoing ad-hoc nature of cuts in Germany and Italy means financing for big projects in Europe will remain challenging,” analysts led by Arcuri wrote in the report.