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China’s Stock Futures Drop After Industrial Company Profits Fall


From Bloomberg:

Most Chinese stocks fell as concern an economic slowdown is deepening overshadowed speculation the government will take more steps to bolster growth.

China Coal Energy Co. (601898) and Datong Coal Industry Co. sank after the statistics bureau said industrial companies’ earnings dropped 2.2 percent in April from a year earlier. Appliance maker Hisense (600060) Electric Co. lost 1.2 percent after Gome Electrical Appliances Holding Ltd.’s first-quarter profit plunged. Anhui Conch Cement Co. (600585) and Baoshan Iron & Steel Co. advanced more than 1 percent after Credit Suisse Group AG said the government is accelerating investment approvals.

“Economic figures for May will continue to be bad,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The current stimulus measures are still perceived to be weak and not enough to reverse a decline in growth. The market is looking forward to more.”

Almost two stocks fell for each one that rose on the Shanghai Composite Index (SHCOMP), which added less than 0.1 percent to 2,334.72 as of the break at 11:30 a.m. local time. The CSI 300 Index (SHSZ300) gained 0.3 percent to 2,581.77. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 0.8 percent in New York on May 25.

The Shanghai index lost 0.5 percent last week, a third week of declines, after a survey by HSBC Holdings Plc and Markit Economics signaled manufacturing may shrink for a seventh month in May. The stock gauge has fallen 2.6 percent this month on concern the slowdown in the world’s second-largest economy is deepening. The measure trades for 10.1 times estimated profit, compared with the MSCI Emerging Markets Index’s multiple of 9.7.

‘Fine Tuning’

The 2.2 percent decline in industrial companies’ profits compared with a 4.5 percent gain in March. China’s State Council said on May 23 that downside risks to growth are increasing and the government will intensify “fine-tuning” policies as needed, signaling it may take more aggressive steps to support the nation’s expansion.

The government should speed up important infrastructure projects in impoverished areas and improve health-care services, the Xinhua News Agency reported yesterday, citing Premier Wen Jiabao during a trip to Hunan province’s remote mountainous areas.

China Coal, the nation’s second-largest coal producer, fell 0.8 percent to 9.06 yuanDatong Coal Industry Co. (601001), the third biggest, lost 1.3 percent to 12.60 yuan. China Petroleum & Chemical Corp., Asia’s biggest oil refiner, dropped 0.9 percent to 6.73 yuan.

Gome Earnings

Thirty-day volatility in the Shanghai Composite was at 14.24 today, the lowest in a year. About 7.4 billion shares changed hands on the gauge on May 25, 18 percent lower than the daily average this year. The measure has advanced 6.2 percent this year on expectations the central bank will ease monetary policies to spur growth.

Hisense, China’s biggest manufacturer of flat-panel televisions, lost 1.2 percent to 17.57 yuan. Wuxi Little Swan Co., a manufacturer of washing machines and air conditioners, fell 3 percent to 10.77 yuan.

Hong Kong-listed Gome, China’s second-largest electronics retailer, said on May 25 after the market closed its first- quarter net income slumped 88 percent from a year earlier. The government stopped giving subsidies on purchases of new home appliances at the end of last year.

Anhui Conch, China’s biggest cement maker, added 2.8 percent to 17.37 yuan. Gansu Qilianshan Cement Group Co. advanced 4.8 percent to 12.79 yuan. Baoshan Steel, the listed unit of China’s second-biggest steelmaker, rose 1.3 percent to 4.86 yuan. Hebei Iron & Steel Co. (000709), the listed unit of the biggest producer, gained 1.3 percent to 3.07 yuan.

Government Stimulus

China is accelerating investment approvals to support growth, with the size of stimulus estimated at between 1 trillion yuan ($157.7 billion) and 2 trillion yuan, Dong Tao, an economist at Credit Suisse, wrote in a note. Bank lending may rebound toward 1 trillion yuan in June and July on a pick-up in infrastructure loans, according to the note.

American depositary receipts on Suntech Power Holdings Co., the world’s biggest solar-panel maker, fell to a seven-month low on May 25 after HSBC Holdings Plc reduced its price estimate on the shares and Nomura Holdings Inc. reiterated a sell recommendation on the ADRs.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slipped 0.5 percent to $32.58, extending last week’s loss to 1.3 percent.

–Zhang Shidong. Editors: Darren Boey, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai atszhang5@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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