By Kana Nishizawa and Weiyi Lim
Chinese stocks fell, with a gauge of shares traded in Hong Kong poised for a five-week low, after a report showed the nation’s industrial output grew at the weakest pace since the global financial crisis.
China Petroleum & Chemical Corp. (386) sank 5 percent in Hong Kong after the refiner known as Sinopec agreed to sell a 107 billion yuan ($17.5 billion) stake in its retail unit. Citic Ltd., which tumbled 4.7 percent last week after being sued by the city’s securities regulator, extended its drop. Automaker SAIC Motor Corp. and household-appliances maker Midea Group Co. fell at least 2 percent in mainland trading to lead declines for consumer companies reliant on economic growth.
The Hang Seng China Enterprises Index, or H-shares gauge, sank 1.5 percent as of 11:37 a.m. local time, heading for the lowest close since Aug. 8. Reports on Chinese factory production, retail sales and asset investment over the weekend all missed estimates, underscoring the risks of a deepening economic slowdown led by a slumping property market.
“Chinese data were not ideal at all, resulting in the drop today,” said Mao Sheng, an analyst at Huaxi Securities Co. in Chengdu. “Investors are on the sidelines to watch for more data this week and the government’s stance on this to decide their next move.”
The Shanghai Composite Index retreated from an 18-month high, slipping 0.2 percent at the midday break, while the CSI 300 Index slid 0.5 percent. The Hang Seng Index of Hong Kong stocks decreased 0.8 percent, falling for a seventh day to extend its longest losing streak since 2012.
Industrial output rose 6.9 percent from a year earlier in August, the statistics bureau said on Sept. 13, down from 9 percent in July and the slowest pace outside the Lunar New Year holiday period of January and February since December 2008, based on previously reported figures compiled by Bloomberg. Retail sales gained 11.9 percent and fixed-asset investment in the January-August period climbed 16.5 percent, both missing analyst estimates.
The data add to risks that China’s third-quarter economic growth will drop below Premier Li Keqiang’s 2014 goal of about 7.5 percent after a measure of new credit released last week trailed estimates and August imports dropped. Li said last week that the government won’t rely on monetary stimulus to spur growth and the government will stick to targeted policies.
Interest-rate swaps dropped by the most in almost three weeks, spurring speculation the central bank will boost stimulus.
Growth in gross domestic product may slip to between 6.5 percent and 7 percent in the third quarter if September numbers also are weak, Australia & New Zealand Banking Group Ltd. analysts estimated. The government has a target of 7.5 percent.
The People’s Bank of China should refrain from cutting interest rates as it would send a “strong” stimulus signal, Shanghai Securities News reported, citing Chen Yulu, an academic adviser to the central bank. The PBOC has other policy tools, including targeted reserve-requirement ratio cuts and open market operations, the report cited Chen as saying.
The Shanghai Composite is valued at 8.4 times 12-month projected earnings, compared with a multiple of 6.9 for the H-shares gauge, according to data compiled by Bloomberg. The H-share measure fell below its 50-day moving average today for the first time since May after tumbling 3.1 percent last week, the steepest drop since March.
“Investors are waiting for better entry data points from China,” said Pauline Dan, Hong Kong-based head of greater China equities at Pictet Asset Management Ltd. “The market had run ahead of the Hong Kong-Shanghai connect” and fund flows may be moving away from the region, she said.
Hong Kong’s bourse said yesterday a second round of rehearsal for a program that allows for mutual access with Shanghai’s stock market was completed smoothly.
Casino operator Galaxy Entertainment Group Ltd. slid 3.7 percent in Hong Kong, extending losses to 9.5 percent over six trading days.
Sinopec fell the most since April in Hong Kong. Its retail unit will sell a combined 29.99 percent stake to 25 investors including Fosun International Ltd. and China Life Insurance Co., it said. The marketing unit’s valuation is worse than expected, and the company may face profit-taking pressure in the short term, Credit Suisse Group AG said.
Futures on the S&P 500 (SPX) slid 0.4 percent today. The equity benchmark lost 0.6 percent on Sept. 12 as investors speculated the U.S. economy is recovering enough to justify higher interest rates sooner than anticipated.
The Federal Reserve, which begins a two-day policy meeting tomorrow, is gauging the strength of the economy as it winds down a bond-buying program that’s on track to end this year. The central bank has said that interest rates would stay low for a “considerable time” after it completes the asset purchases.
To contact the editors responsible for this story: Sarah McDonald at [email protected]