China’s Stocks Drop Most in Five Weeks as Rate Cut Disappoints

By Zhang Shidong and Fabio Alves

Dec. 23 (Bloomberg) -- China’s stocks slid by the most in five weeks, led by developers and energy companies on concern the latest interest-rate cut wasn’t deep enough to keep the world’s fourth-largest economy from weakening.

China Vanke Co., the nation’s biggest publicly traded property developer, lost 4.9 percent and Poly Real Estate Group Co., the second largest, retreated 6.4 percent. China Petroleum & Chemical Corp., the country’s second-biggest oil company, dropped 4.3 percent and China Shenhua Energy Co., the nation’s largest coal producer, fell 4.7 percent on concern a deepening recession will reduce the demand for energy.

The CSI 300 Index, the benchmark gauge of companies traded in Shanghai and Shenzhen, sank 98.59, or 4.9 percent, to 1,918.95 at the close, the biggest drop since Nov. 18. Only 5 stocks rose on the 300-member measure.

“If the economy was in a good shape, there wouldn’t be so many rate cuts, the effect of which is subsiding now,” said Yi Yangfang, a fund manager at Guangzhou-based GF Fund Management Co., which oversees the equivalent of $12 billion. “The market is worried that first-quarter earnings could be still ugly.”

China lowered borrowing costs for the fifth time in three months yesterday after trade growth collapsed because of recessions in the U.S., Europe and Japan. The one-year lending rate will drop by 0.27 percentage point to 5.31 percent and the deposit rate by the same amount to 2.25 percent, the People’s Bank of China said yesterday after the market closed.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Fabio Alves in New York at falves3@bloomberg.net.