China's Stock Futures Drop on Slowing Economy, Greece Concerns - BusinessWeek

Most Chinese stocks fell on concern the economic slowdown may accelerate and as speculation intensified Greece may leave the euro area.

Jiangxi Copper Co. (600362) and China Shenhua Energy Co. led declines for commodity producers after the Wall Street Journal cited an official from the National Development and Reform Commission as saying growth may be below 7 percent without more stimulus. Gemdale Corp., the fourth-largest developer by market value, advanced 3.4 percent after the China Securities Journal said the property market may see a mild recovery.

“Sentiment is still weak as investors are shunning risk assets to avoid contagion from Europe,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “It’s a bit hard to reverse the risk-averse sentiment at this moment.”

About three stocks fell every for two that rose on the Shanghai Composite Index (SHCOMP), which climbed 1.20 points, or 0.1 percent, to 2,374.50 as of 10:01 a.m. local time. The CSI 300 Index (SHSZ300) rose 0.1 percent to 2,630.12. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 0.9 percent in New York yesterday.

Thirty-day volatility in the Shanghai index was at 14.92 today, a one-week low. About 7.7 billion shares changed hands in the gauge yesterday, 14 percent lower than the daily average this year.

The Shanghai index has climbed 7.9 percent this year on expectations the government will relax monetary policy to support growth and take more measures to bolster equities. Stocks in the gauge are valued at 10.2 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

‘Lack of Leadership’

The MSCI Asia Pacific Index slid 1 percent today. Dow Jones cited former Greek Prime Minister Lucas Papademos as saying the nation is considering preparations to leave the shared currency. European Union leaders are planning to gather in Brussels to discuss how to revive growth.

Jin Liqun, chairman of China Investment Corp.’s supervisory board, said yesterday European authorities have shown a “lack of leadership” on the euro area’s debt crisis and other countries may leave if Greece exits the single currency bloc.

Europe is China’s biggest export market, accounting for about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

Jiangxi Copper, China’s biggest producer of the metal, fell 1.1 percent to 25.59 yuan. Zhuzhou Smelter Group Co., the country’s biggest producer of refined zinc, dropped 2 percent to 10.50 yuan. Shenhua, the nation’s largest coal producer, slipped 0.5 percent to 26.12 yuan.

Growth Slump

China’s full-year economic growth may be below 7 percent unless the government introduces more stimulus measures, the Wall Street Journal reported on its Chinese-language website, citing Chen Dongqi, deputy head of the National Development and Reform Commission’s macroeconomic research institute. The government is targeting 7.5 percent growth this year.

The government may introduce “stronger” policies for stable economic growth, China Business News reported, citing an unidentified person. The policies, especially in the areas of investment and credit, will be discussed by high-level officials “soon,” the report cited the unidentified person as saying.

Gemdale (SHPROP) advanced 3.7 percent to 6.65 yuan. China Vanke Co., the nation’s biggest listed property developer, rose 0.9 percent to 9.09 yuan.

The real estate market may be supported by strong demand, the China Securities Journal reported today, citing unidentified people. Property curbs have stabilized, the newspaper said.

Rate-Cut Outlook

An interest-rate cut can’t be ruled out if data for May indicate further slowing growth, the China Securities Journal reported today, citing unidentified people.

China may keep easing monetary policy, including lowering the reserve-requirement ratio, the newspaper said. The central bank should consider lowering benchmark lending rates or allow more loans at discount rates, according to the report. Interest rates haven’t been cut since 2008.

HSBC Holdings Plc and Markit Economics are due to release a preliminary May reading for manufacturing tomorrow. It was at 49.3 a month last month, below the 50 dividing line for expansion and contraction.

Trina Solar Ltd. (TSL) (TSL) led declines among the most-traded Chinese equities in the U.S. on speculation the solar-panel maker will disappoint investors (TSL) for a fifth quarter.

Trina will probably say that sales dropped 28 percent to $398 million, according to the median estimate of 19 analysts surveyed by Bloomberg, when it reports first-quarter earnings today. The company reported net income that fell short of analysts’ estimates (TSL) in the last four quarters. Chinese solar manufacturers have reported losses since the second quarter of 2011 as the industry has been plagued by overcapacity and as European countries started to cut solar energy subsidies.

The iShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., slid 0.7 percent to $33.63, rising only once in the past 15 days.

--Zhang Shidong. Editors: Allen Wan, Richard Frost

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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