China's Stock Futures Drop After Industrial Company Profits Fall - Bloomberg

By Bloomberg News - 2012-05-28T01:31:45Z

China’s stock futures fell, signaling declines for equities, as a drop in industrial companies’ profits fueled concern an economic slowdown is deepening.

China Vanke Co. may lead losses among developers after the Oriental Morning Post said new home inventories in Shanghai reached a four-year high. Banks may move after the industry regulator said China will encourage greater private investment in lenders to fuel growth.

“Economic figures for May will continue to be bad and there’s no improvement from the April ones,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “The economy is still on a slowing trajectory and the market is very cautious about buying.”

Futures on the CSI 300 Index (SHSZ300) expiring in June lost 0.3 percent to 2,556 as of 9:28 a.m. local time. The Shanghai Composite Index (SHCOMP) dropped 0.7 percent to 2,333.55 on May 25, the lowest close in six weeks. The CSI 300 Index declined 0.9 percent to 2,573.10. 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.

The Shanghai index lost 0.5 percent last week, a third week of declines, after a survey by HSBC Holdings Plc and Markit Economics showed manufacturing may shrink for a seventh month in May. The stock benchmark has fallen 5.2 percent from this year’s high on March 2 on concern the slowdown in the world’s second- largest economy is deepening.

‘Fine Tuning’

Industrial companies’ profits declined 2.2 percent from a year earlier in April, the National Bureau of Statistics said on its website yesterday. That 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.

About 7.4 billion shares changed hands in the Shanghai Composite on May 25, 18 percent lower than the daily average this year. Thirty-day volatility in the gauge was at 14.29, the lowest in a year.

Developers may be active today. New home inventory topped 10 million square meters in Shanghai as of May 27, the Oriental Morning Post reported today, citing online real-estate data. It may take 14.4 months to digest current inventory, a period that is close to a record, the paper said, citing Yang Chenqing, a China Real Estate Information unit analyst.

Bank Investments

Bank shares may move. Qualified companies can buy into lenders through private stock placements or new share subscriptions, equity transfers or mergers and acquisitions, according to guidelines released by the China Banking Regulatory Commission in a statement posted on its website on May 26. The regulator also said it will encourage private investment in trust, financial leasing and auto- financing companies.

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.

Suntech reported last week a net loss of $133 million for the first three months of 2012, one of the three solar makers to report worse-than-estimated results among Chinese companies traded in New York, according to data compiled by Bloomberg. Earnings are falling at a time Europe is cutting solar energy subsidies as the region’s debt crisis lingers and the U.S. is imposing tariffs on Chinese solar-product imports.

China ETF Slumps

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.

The U.S. imposed tariffs of 31 percent to 250 percent on Chinese solar-product imports, the Commerce Department announced on May 17. Suntech was told to pay 31.22 percent.

Yingli Green Energy Holding Co., the sixth-largest silicon- based solar module producer, will probably report a $32.8 million net loss in the first quarter on May 30, according to the average estimate of 12 analysts surveyed by Bloomberg. This compares with a $56.2 million net profit a year ago.

--Zhang Shidong. Editors: Darren Boey, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Belinda Cao in New York at lcao4@bloomberg.net; Leon Lazaroff in New York at llazaroff@bloomberg.net

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