| Businessweek | - |
China’s
stock-index futures fell as the country's biggest drop in exports since
2009 boosted concern the slowdown in economic growth is accelerating.
Bloomberg News
China Stocks Fall as Yuan Weakens on Unexpected Drop in Exports
China’s stocks fell and the yuan
weakened as an unexpected plunge in exports boosted concern the
slowdown in economic growth is accelerating.
The Shanghai Composite Index (SHCOMP) slid 1.3 percent to 2,031.02
at 9:55 a.m., the biggest loss since Feb. 25, as Jiangxi Copper
Co. and China Southern Airlines Co. led declines for material
and industrial companies. The Chinese currency fell as much as
0.5 percent against the dollar, which would be the steepest
retreat on a closing basis since December 2008, before paring
its decline to 0.3 percent. Overseas shipments slumped 18.1
percent in February, compared with analysts’ median estimate for
a 7.5 percent increase. “There’s a slew of bad news today -- lousy economic data, IPOs may be restarting, the policy meeting is ending soon with no surprises and the Ukraine situation isn’t helping,” said Xu Shengjun, analyst at Jianghai Securities Co. “The market is being dragged down by all these factors, I don’t see any positive stories today.”
The Shanghai Composite has dropped 4.3 percent this year amid concern the resumption of new share offerings will divert funds and economic expansion will ease as banks tame lending.
The yuan has weakened 1.4 percent in 2014, the second-worst performing currency in Asia, according to data compiled by Bloomberg. The People’s Bank of China lowered the daily reference rate by 0.18 percent to 6.1312 per dollar today, the weakest level since Dec. 3.
The drop in exports highlights the challenges for Premier Li Keqiang in achieving this year’s economic-growth target of 7.5 percent. Li announced the goal last week at the opening of the annual meeting of the National People’s Congress in Beijing, a pace unchanged from last year.
It won’t be easy for China to achieve 7.5 percent this year and policies may be introduced to stabilize growth in the second quarter, the China Securities Journal said in a commentary.
Trade Distortions
Distortions from the Lunar New Year holiday and false invoices that inflated trade numbers last year, along with a larger-than-projected increase in imports, make it harder to assess the true picture of global and domestic demand for Chinese goods. Imports rose 10.1 percent in February from a year earlier, leaving a trade deficit of $23 billion, the biggest in two years.“Seasonality and fake trade distortion were behind the February exports slump and trade deficit,” Barclays Plc economists Jian Chang and Jerry Peng wrote in a report.
The CSI 300 Index slumped 1.8 percent, while the Hang Seng China Enterprises Index (HSCEI) plunged 1.6 percent. The Bloomberg China-US Equity Index slid 1.3 percent on March 7.
Jiangxi Copper tumbled 4.4 percent as prices of the metal plunged by the daily limit in Shanghai. China Southern slid 1.9 percent after the carrier said it sold seven tickets for the Malaysian Airline System Bhd. flight that has gone missing.
Inflation Slows
Malaysia stepped up efforts to locate the jet that may have crashed in the Gulf of Thailand with 239 people on board, focusing on oil slicks with officials examining television footage. The prospect of terrorism arose after Austria and Italy said passports used by two male passengers were stolen from their citizens. The flight was a codeshare with China Southern.China’s consumer price index rose 2 percent in February from a year earlier, a 13-month low, data from the National Bureau of Statistics showed yesterday. Producer prices fell 2 percent, the most since July, extending the longest decline since 1999. Slowing consumer-price gains may give leaders more space to support growth if needed as they gauge the effects of the nation’s first onshore corporate-bond default.
Bond Default
Shanghai Chaori, a solar-cell maker, said March 7 it won’t be able to make an interest payment due that day in full, providing the first default in China’s onshore bond market. Chaori’s experience may be a sign the government is backing off from its practice of bailing out companies with bad debt.China should allow companies to default on their bonds, an external supervisor at the Bank of China said March 8.
“We need to be more accepting and allow such defaults to happen,” Mei Xingbao told reporters during a meeting of the Chinese People’s Consultative Conference in Beijing. “The debtor must be responsible for his own debt. He must tell the investors that there is risk involved in the product.”
To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Allen Wan, Chan Tien Hin
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