China Stock Index Declines as Commodity Prices, Earnings Plunge

By Zhang Shidong

Jan. 13 (Bloomberg) -- China’s stocks fell by the most in three weeks, led by materials producers and banks, after commodity prices tumbled and Shenzhen Development Bank Co. said profit may have slumped.

Henan Shen Huo Coal Industry & Electricity Power Co. lost 6.2 percent. Jiangxi Copper Co., China’s second-biggest producer of the metal, retreated 6.9 percent. Aluminum Corp. of China Ltd., the nation’s biggest maker of the lightweight metal, fell 3.7 percent after rival Alcoa Inc. had its first quarterly loss in six years. Shenzhen Bank, controlled by buyout firm TPG Inc., slid 4 percent.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China’s two exchanges, sank 44.50, or 2.3 percent, to 1,876.19 at the close, the most since Dec. 23. Almost seven stocks fell for each that rose on the 300-constituent measure.

“The poor economic situation and earnings data have reignited concerns that more bad things will follow,” said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “Buying sentiment will be weak in the coming days.”

Wanxiang Qianchao Co. and Gansu Jiu Steel Group Hongxing Iron & Steel Co. led gains among auto-related stocks and steelmakers after a newspaper report said China’s Cabinet will review stimulus plans for the two industries tomorrow.

Spending Plan

The benchmark index has given up almost half of a 28 percent rebound from a two-year low on Nov. 4. The government’s 4 trillion yuan ($585 billion) spending plan unveiled in November and the biggest lending rate cut in 11 years drove earlier gains. The CSI 300 lost 66 percent last year on concern slowing economic growth and shrinking industrial production would dent corporate earnings.

A report by the customs bureau today showed China’s exports fell the most in almost a decade in December as demand for the nation’s toys, clothes and electronics declined.

Youngor Group Co., China’s No. 1 maker of men’s clothing by sales, dropped 2.2 percent to 7.42 yuan. Luthai Textile Co., a textile maker in the eastern province of Shandong, slid 3 percent to 6.41 yuan. Shanghai Haixin Group Co., a manufacturer of plush and stuffed toys, lost 2.3 percent to 2.99 yuan.

Shen Huo Coal sank 6.2 percent to 14.91 yuan. Jiangxi Copper fell 6.9 percent to 11.84 yuan. Zhongjin Gold Corp., the country’s second-largest producer of the precious metal by market value, slid 4.1 percent to 35.20 yuan. Shenzhen Zhongjin Lingnan Nonfemet Co., China’s fourth-largest zinc producer, retreated 9.1 percent to 9.34 yuan.

Commodities

The Reuters/Jefferies CRB Index of 19 commodities yesterday retreated 4.1 percent as the weakening global economy continued to slash demand for raw materials. Corn, soybeans and wheat plunged the most allowed by the Chicago Board of Trade and gold slid the most in six weeks. Today, crude oil fell below $37 a barrel while copper futures plunged by the exchange-imposed 5 percent daily limit in Shanghai.

“The commodities industry’s fundamentals won’t reverse in coming months, with most of the sub-industries operating at a loss or low margin,” said analyst Li Zhuiyang at Citic Securities Co. in a note today. “Valuations aren’t that attractive and have yet to reach historical bottoms.” Li maintains a “neutral” recommendation on the metals industry.

Aluminum Corp. of China, also known as Chalco, fell 3.7 percent to 6.44 yuan. Alcoa, the largest U.S. aluminum producer, reported its first quarterly loss in six years after prices and demand for the metal plunged.

Shenzhen Bank

Shenzhen Bank tumbled 4 percent to 9.47 yuan. The bank said 2008 profit may have dropped 77 percent to about 600 million yuan as it set aside more provisions against bad loans to bolster its financial strength.

Wanxiang Qianchao, the listed unit of China’s largest auto- parts maker, jumped 6.8 percent to 3.76 yuan, the biggest gainer on the CSI 300. Gansu Jiu Steel Group climbed 2.1 percent to 5.40 yuan. SAIC Motor Co., China’s largest carmaker, added 1.5 percent to 6 yuan. Laiwu Steel Corp. climbed 2.1 percent to 6.41 yuan.

Premier Wen Jiabao said Jan. 2 that China is drawing up plans to support the steel and auto industries after growth in the world’s fourth-largest economy sagged. The country’s vehicle sales grew at the slowest pace in a decade last year

The plan was submitted to the State Council, the nation’s highest administrative body, last night, Shanghai Securities News reported today, citing unidentified sources. It didn’t say when details would be made public.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 2 percent to 1,863.37. The Shenzhen Composite Index lost 2.9 percent to 571.62.

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

Air China Ltd. (601111 CH), the nation’s largest international carrier, declined 0.23 yuan, or 5.2 percent, to 4.20. The carrier said its parent is in talks to buy all or part of East Star Airlines.

Chenzhou Mining Group Co. (002155 CH), the world’s second- largest producer of antimony used to harden lead in batteries, slid 0.53 yuan, or 6 percent, to 8.25. Net income for 2008 probably decreased between 20 percent and 40 percent from a year earlier, because product prices slumped in the fourth quarter and the company made provisions for bad debts and inventories, the company said in a statement. Chenzhou Mining in October forecast an increase of as much as 50 percent for 2008 profit.

Hunan Sunward Intelligent Machinery Co. (002097 CH), a manufacturer of hydraulic excavators, tumbled 1.43 yuan, or the 10 percent daily limit, to 12.85, the biggest declined on the CSI 300. Profit for 2008 probably dropped by between 50 percent and 70 percent from a year earlier, because of decreasing demand for products and foreign exchange losses, the company said in a statement. Hunan Sunward said in October earnings would fall less than 30 percent.

Western Mining Co. (601168 CH), China’s fourth-largest maker of zinc concentrate, dropped 0.36 yuan, or 5 percent, to 6.91. Goldman Sachs Strategic Investments (Delaware) LLC, a unit of Goldman Sachs Group Inc., sold a total of 78 million shares in the company between Aug. 7 last year and Jan. 9, or close to 3.3 percent of total shares outstanding, Western Mining said in a statement yesterday.

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