China’s stocks plummeted before tomorrow’s industrial production data as a decrease for energy producers overshadowed advances for monetary firms. The Hang Seng China Enterprises Index reached a bear market.
China Petroleum & Chemical Corp. downgraded 4.6 percent and PetroChina Co. backslide 1.8 percent as the nation’s two largest refiners added to half of the losses in the Shanghai Composite Index. They were responsible for a quarter of the decline in the H-shares gauge, which is down 19 percent from the December 2 high after backing down 2 percent today. China Citic Bank Corp. soared 7.2 percent in Shanghai after the lender said it would provide a virtual credit card with Tencent Holdings Ltd..
The Shanghai Composite plunged 0.6 percent to 1,988.49 at 1:01 p.m. local time, while the CSI 300 Index decreased 0.3 percent to 2,103.09. The Shanghai index has fallen 6 percent this year as an onshore bond default, a weakening yuan and tension between Ukraine and Russia fired up the worries about the economy. Data this month have revealed pullbacks in manufacturing and exports, making it difficult for China to achieve the 7.5 percent economic growth goal declared at this year’s legislative assemblies.
“Bad economic data, no new reforms to stimulate the economy and the psychological impact from the Ukraine crisis are dampening sentiment for stocks,” said Zhang Gang, a strategist at Central China Securities in Shanghai. “There are too many bad news so it has resulted in a trend of declines as investors haven’t seen a bottom yet. It could fall a bit more.”
Industrial output possibly progressed 9.5 percent in February, compared with a 9.7 percent hike the previous month, according to the median estimate of 47 economists surveyed by Bloomberg. Retail sales may have skyrocketed 13.5 percent last month, up from 13.1 percent in January, Bloomberg projections revealed.
ETF Outflows
The Hang Seng China AH Premium index, a gauge of financial values for mainland-exchanged shares against those in Hong Kong, boosted as much as 2 percent, the most since February 4. The Bloomberg China-US Equity Index gave up 2 percent yesterday.
Withdrawals from U.S.-based Chinese ETFs totaled $87.5 million March 10, the most among 46 nations, bringing this year’s redemption to $380.7 million, according to data gathered by Bloomberg. Redemptions accelerated in March as reports showed development slowing and the yuan loses stability versus the dollar.
China Petroleum, known as Sinopec, relinquished 4.6 percent in Shanghai and 4.1 percent in Hong Kong. PetroChina tumbled 1.8 percent in Shanghai and 2.4 percent in Hong Kong.
Refiner Earnings
China’s weakest economic development in almost a quarter century is prompting record exports of diesel that threaten the profitability of Asian refiners. The return from making the fuel may average $17.48 a barrel in 2014, 2 percent less than in 2013 and the weakest in four years, according to KBC Energy Economics, a consultant based in Walton-On-Thames, England. China will more than double shipments this year, ICIS-C1 Energy projects.
Official data over the weekend revealed the sharpest drop in exports since 2009 and the slowest inflation in 13 months, featuring the challenges for Premier Li Keqiangin achieving this year’s goal of 7.5 percent. Li is due to speak to the media tomorrow when the yearly assembly of the National People’s Congress ends.
China Citic Bank advanced 7.2 percent to 5.33 yuan in Shanghai. The lender, Tencent and Zhongan Online Property and Casualty Insurance Co. plan to offer one million Weixin virtual credit cards initially, according to an emailed remarks. Alibaba.com Ltd. stated yesterday China Citic Bank will provide one million cards on Alipay wallet next week.
Bank of Beijing Co., which said last month it planned to work with smartphone maker Xiaomi Corp. on mobile payments, soared 2.4 percent to 7.24 yuan.
Default Concerns
Investor scrutiny of China’s onshore bond market is increasing after Chaori Solar said March 4 it would only be able to pay 4 million yuan ($653,000) of an 89.8 million yuan coupon payment due yesterday. Chaori Solar’s failure to pay has fired up speculation that more firms may not be able to hit debt deadlines also.
Baoding Tianwei Baobian Electric Co.’s bonds and shares were suspended from exchanging yesterday after the Chinese electrical equipment maker said it reported declines for a second year running.
“For some investors who have already been deeply worried about a ‘Bear Stearns Moment’ or an imminent ‘Lehman Moment,’ this could be perceived as another snowflake to trigger an avalanche,” Bank of America Corp. economist Lu Ting wrote in a report. “We do see a significant rise in bond and trust defaults, but we see little chance of systematic credit crunch and growth hard landing.”
The yuan gave up 1.4 percent versus the greenback this year, the second-weakest performer out of 12 Asian currencies tracked by Bloomberg. The currency was slightly altered at 6.14 today.
“Investors are pulling out of financial markets where there’s an economic slowdown and a lot of uncertainties,” Dave Lutz, the head of ETF trading and strategy at Stifel Nicolaus & Co. in Baltimore, said yesterday. “The outflow of capital from China will not end until investors stop seeing all the headlines about China indicating the country’s growth is faltering.”
