China’s stocks fell, dragging the benchmark index to the lowest level in three months, after a report showed China’s manufacturing may shrink for an eighth month in June and the U.S. cut its economic growth estimates.
Jiangxi Copper Co. and China Shenhua Energy Co. the biggest copper and coal producers, declined at least 2 percent on concern demand for commodities will slow. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. fell after the 21st Century Business Herald said the four biggest lenders saw net deposits decline by a combined 460 billion yuan ($72 billion) in the first two weeks of this month.
The Shanghai Composite Index lost 35.3 points, or 1.5 percent, to 2,257.59 at 1:08 p.m., set for the lowest close since March 29 and a weekly decline as financial markets are closed tomorrow for a holiday. The CSI 300 Index slid 1.8 percent to 2,506.82. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, fell 0.9 percent in New York.
“Investors have accepted the fact that the economy is going to be bad and stimulus measures will be slow,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “There’s little impetus to enter the market so stocks will be dragged down in the near term.”
Concerns that a growth slowdown is deepening and Greece will leave the euro area have pushed the Shanghai index down 8.3 percent from this year’s high set on March 2. It’s up 2.6 percent for the year.
China’s manufacturing may contract in June, matching the streak during the global financial crisis in a signal the government’s stimulus has yet to reverse the economy’s slowdown.
U.S. Outlook
The 48.1 preliminary reading for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compares with a final 48.4 for May. A reading above 50 indicates expansion. If confirmed on July 2, it would equal the run of below-50 readings from August 2008 to March 2009.
A gauge of energy producers in the CSI 300 slid 2.8 percent, the most among 10 industry groups. The materials measure lost 2.2 percent. Shenhua Energy fell 2.1 percent to 23.43 yuan. PetroChina Co., the biggest energy producer, slumped 1.2 percent to 9.15 yuan. Jiangxi Copper declined 3.5 percent to 24.36 yuan.
The U.S. central bank cut its estimates for growth and said it sees little progress on unemployment during the rest of the year. The Federal Reserve lowered its estimate for 2012 gross domestic product growth to 1.9 percent to 2.4 percent, from 2.4 percent to 2.9 percent in April.
Banks Drop
The Fed will expand its Operation Twist program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012. That “should put downward pressure on longer- term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said.
Chinese banks’ borrowing costs rose for a third week, the longest stretch in 2012, as a funding squeeze fanned speculation policy makers will relax lenders’ reserve requirements. Shibor, for 1-month yuan loans, climbed 51 basis points in June to 3.48 percent, after 5 months of declines caused by monetary easing.
Industrial Bank Co. retreated 1.5 percent to 12.77 yuan. China Merchants Bank Co. declined 1.2 percent to 10.90 yuan. ICBC, the biggest lender, slid 0.5 percent to 3.92 yuan, while China Construction Bank lost 0.9 percent to 4.49 yuan. The two lenders along with Bank of China Ltd. and Agricultural Bank of China Ltd. saw net deposits drop by a combined 460 billion yuan in the first two weeks of June, the 21st Century Business Herald reported, citing an unidentified lender.
QFII Reform
The government will cut the minimum requirement on assets under management to $500 million from $5 billion for companies seeking a license under the Qualified Foreign Institutional Investor program, the China Securities Regulatory Commission said in a statement on its website yesterday. The regulator also said it will allow them to invest in the country’s interbank bond market.
The iShares FTSE China 25 Index Fund, the biggest U.S.- listed China exchange-traded fund, lost 0.3 percent to $33.94, snapping a six-day rally.
“The sentiment is pretty low right now,” Kevin Shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in Purchase, New Work, said by phone yesterday. “Chinese policy makers really need to do something to help the economy rebound. They’ve been too cautious and they should be aggressive right now.”
