China's Stocks Decline to 2009 Low; B Shares Slump on New Rules - Businessweek

China’s stock-index futures were little changed, signaling the benchmark gauge may fluctuate at the start of trade, amid concern the slowing economy will hurt earnings growth.

Futures on the CSI 300 Index (SHSZ300) expiring in August, the most active contract, fell less than 0.01 percent to 2,363.80 as of 9:22 a.m. in Shanghai. Suning Appliance Co. may drop after net income declined. Steelmakers may gain after a report said the government is considering a tax rebate for the companies. China Railway Group Ltd. may advance after the China Daily said the government may spend 1 trillion yuan ($156.8 billion) building subways in the five years from 2010.

The Shanghai Composite Index (SHCOMP) dropped 0.9 percent to 2,109.91 yesterday. The index fell 5.2 percent in July, the biggest decline among benchmark indexes in Asia. The gauge has fallen 14 percent through yesterday from this year’s high on March 2 amid concern the economic slowdown is deepening and Europe’s debt crisis is worsening.

“If 2,100 gives way, which looks likely, it warns that the 1,665 low seen in late 2008 will not only be tested but should be broken,” Thomas Schroeder, a Bangkok-based managing director at Chart Partners, wrote in an e-mailed response to questions. “I have targets at 1,700 and then near the 1,500 region upon a breach of the 2008 low.”

The CSI 300 Index decreased 0.6 percent to 2,335.79 yesterday. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, dropped 1.4 percent to 86.92 in New York.

Measures Needed

Chinese government should introduce measures to stabilize the nation’s stock market and boost investor confidence, according to a commentary on the front-page of the Securities Times today. Finance and tax agencies should consider cutting the dividend tax and stamp duty, among other measures, a reporter at Securities Times named Xiao Bo wrote.

Thirty-day volatility in the Shanghai index was at 14.3. About 5.2 billion shares changed hands in the gauge yesterday, 31 percent lower than the average this year. The index is valued at 9.4 times estimated profit, compared with the three-year average of 14.7.

The National Development and Reform Commission has approved the plans of 28 cities to build subway systems, with 2,500 kilometers of subways planned from 2010-2015, the China Daily reported, citing Chen Xunru, a member of the Chinese People’s Political Consultative Conference who has researched the projects.

Suning Profit

Suning Appliance’s first-half net income fell 29.5 percent from a year earlier to 1.74 billion yuan, according to a preliminary earnings statement.

The Ministry of Industry and Information Technology is considering giving a 17 percent value-added tax rebate to domestic steelmakers that supply steel for export products, the Shanghai Securities News reported today, citing an unidentified person close to the ministry.

Large-and medium-sized steelmakers’ combined first-half profit fell 96 percent from a year ago to 2.39 billion yuan, the Economic Information Daily reported yesterday.

The iShares FTSE China 25 Index Fund (FXI), the biggest Chinese exchange-traded fund in the U.S., slipped 0.2 percent to $34.06, snapping a three-day rally. The Standard & Poor’s 500 Index of the biggest U.S. shares was little changed at 1,385.30.

Bond Issue

Suntech Power Holdings Co. (STP) (STP), based in Wuxi of China’s Jiangsu, decreased to $1.34 in New York, the lowest level since the company’s initial public offering in 2005.

The company said it’s suing Javier Romero, a former Suntech sales representative who manages an affiliated company that Suntech says pledged German bonds as collateral for payment guarantees. The bonds may never have existed, Suntech said in a statement yesterday. The company said it may delay its second- quarter earnings report while it evaluates the financial impact of the incident.

Trina Solar Ltd. (TSL) (TSL), the third-biggest solar cell maker and fourth-biggest photovoltaic panel maker, dropped 11 percent to $4.84, the lowest level since March 2009.

The Guangzhou-based company lowered its estimate of solar module shipments for the second quarter by as much as 25 percent to 390 megawatts, citing solar power projects in China and the effect on U.S. import tariffs from the Asian country. It also cut its gross margin forecast to as low as 7 percent from the previous guidance of 10 percent.

Analysts at both Deutsche Bank AG and Jefferies Group Inc. reduced (TSL) their 12-month price estimates for Trina to $5 from $6 yesterday.

Yingli Green Energy Holding Co., the world’s sixth-largest silicon-based solar module producer based in Baoding of China’s Hebei province, tumbled 11 percent to a record low of $1.83. LDK Solar Co., the world’s second-largest maker of wafers, dropped 5.8 percent to $1.47.

-- Editor: Richard Frost

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

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