China's Main Stock Index Slumps, Posting Worst Week on Record

By Zhang Shidong

Oct. 10 (Bloomberg) -- China's stocks slumped for a fifth day, driving the benchmark index to its worst week on record, amid concern the deepening credit crisis will push the global economy into recession and curb demand for Chinese goods.

China Merchants Bank Co., the nation's biggest dual- currency credit-card issuer, dropped 3.8 percent. China Shenhua Energy Co., the nation's largest coal producer, slid 5.7 percent as oil sank. Yunnan Chihong Zinc & Germanium Co., China's fifth- largest zinc producer, plunged by the 10 percent daily limit after profit sank more than two-thirds in the first nine months.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 88.34, or 4.4 percent, to 1,906.96 at the close. Only 18 stocks rose on the 300-member gauge and all the 10 industry groups fell. The measure slumped 15 percent this week, the most since its introduction in 2005.

``It's panic selling,'' said Fan Dizhao, an investment manager at Guotai Asset Management Co. in Shanghai, which oversees the equivalent of $5.l billion. ``The expectation about the domestic economy is still not good as the worst could come in the first quarter next year.'' Fan said he'll keep stocks of companies with fair valuations and long-term growth prospects, without being specific.

The CSI 300 has erased almost all the 18 percent rebound triggered by a government announcement on Sept. 18 that it would buy more shares in the three-biggest listed banks and cut a stock trading tax to shore up equities. The measure has retreated 64 percent this year.

Merchants, ICBC

U.S. stocks tumbled yesterday, wiping out almost $900 billion in market value. The Standard & Poor's 500 Index slid 7.6 percent to 909.92, capping a seven-day decline, the longest losing streak since 1996.

Merchants Bank, the nation's biggest dual-currency credit- card issuer, fell 3.8 percent to 13.84 yuan, the lowest close since December 2006. Bank of China Ltd., the nation's third- largest bank, retreated 6.3 percent to 3.11 yuan. China Construction Bank Corp., the second largest, retreated 2.4 percent to 4.11 yuan.

A U.S. housing slump and subsequent crash in investments tied to the country's mortgage industry has locked up credit markets and stymied corporate expansion plans.

The Chinese economy, the world's fourth largest, expanded 10.1 percent in the second quarter, the slowest pace since 2005. UBS AG said Oct. 6 it reduced its estimate for China's growth in 2009 to 8 percent from 8.8 percent. Net exports accounted for 22 percent of China's economic growth last year.

Shenhua, Datong

Shenhua lost 5.7 percent to 20.22 yuan. Datong Coal Industry Co., China's second-largest coal company by capacity, tumbled 8.8 percent to 11.82 yuan. China Coal Energy Co., the third largest, plunged 9.9 percent to 8.03 yuan.

Chihong Zinc slid 10 percent to 9.23 yuan. The company said profit in the first nine months fell 70 percent after metal prices plunged. Jiangxi Copper Co., China's second-biggest producer of the metal, retreated 9.9 percent to 11.60 yuan.

Crude oil tumbled as much as $4.59 a barrel to $82.00, headed for its biggest weekly decline since December 2004, pacing a slump in commodities. Oil in New York fell to the lowest in a year and copper traded at its lowest since March 2006.

Goldman Sachs Group Inc.'s Australian venture cut its forecasts for iron ore and coal, in a report. Copper and zinc tumbled by the exchange-imposed daily limit today in Shanghai.

Shanghai, Shenzhen

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, lost 3.6 percent to 2,000.57. The Shenzhen Composite Index fell 5.5 percent to 531.43.

The following companies were among the most active in China's markets. Stock symbols are in brackets after companies' names.

Automakers: China's passenger-car sales fell 1.4 percent in September, the second straight decline, the China Association of Automobile Manufacturers said in a statement today, as drivers deferred purchases because of a slumping stock market.

SAIC Motor Co. (600104 CH), China's largest carmaker, dropped 0.36 yuan, or 6 percent, to 5.69. Dongfeng Automobile Co. (600006 CH), which makes light trucks in China with Nissan Motor Co., lost 0.13 yuan, or 4.3 percent, to 2.87.

Shipping lines: The Baltic Dry Index, a measure of commodity-shipping rates, dropped 9.4 percent yesterday in London, bringing this year's plunge to 73 percent.

China Shipping Development Co. (600026 CH), the nation's biggest oil carrier, tumbled 0.92 yuan, or 9.7 percent, to 8.61. China Cosco Holdings Co. (601919 CH), the country's largest container line, plunged 1.13 yuan, or the 10 percent daily cap, to 10.19.

Air China Ltd. (601111 CH), the nation's largest international carrier, dropped 0.41 yuan, or 7.3 percent, to 5.24. The carrier's cargo unit plans to borrow $165.2 million from Bank of China Ltd. and China Development Bank to buy three TU-204 planes.

Gemdale Corp. (600383 CH), a Chinese developer that partnered with ING Groep NV, slid 0.37 yuan, or 6.3 percent, to 5.49. The company said it sold apartments with a total floor space of 731,100 square meters in the first nine months, down 8.6 percent from a year earlier.

Haitong Securities Co. (600837 CH), the country's largest listed brokerage by market value, lost 0.24 yuan, or 1.2 percent, to 20.11. Haitong said it signed an agreement with Japan's Chuo Mitsui Trust Holdings Inc. to cooperate on asset management, trust and securities businesses.

Sany Heavy Industry Co. (600031 CH), China's biggest maker of machinery for handling concrete, tumbled 1.61 yuan, or 10 percent, to 14.64. Sany said it plans to swap 1.98 billion yuan ($290 million) of new shares to 10 stockholders for an excavator factory in the eastern Chinese city of Kunshan.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net