By Bloomberg News
Sept. 23 (Bloomberg) -- China’s stocks dropped for a second day, dragging the Shanghai Composite Index to a three-week low, as falling steel prices and transport rates spurred concern the country’s economic recovery is faltering.
Tangshan Iron & Steel Co. retreated 3.9 percent after its parent cut prices of reinforcing bars used in buildings for a second month. China Cosco Holdings Co. fell 3 percent as a measure of shipping costs for commodities declined. PetroChina Co., the nation’s biggest oil company, lost 1.7 percent after crude slipped.
“Judging from falling product prices, the recovery doesn’t seem to be very solid and the outlook is still clouded by uncertainty,” said Yan Ji, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management Co. in Shanghai.
The benchmark index fell 54.83, or 1.9 percent, to 2,842.72 at the 3 p.m. close, adding to yesterday’s 2.3 percent drop and its lowest close since Sept. 2. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, slid 2.3 percent to 3,060.07.
The Shanghai gauge has lost 18 percent since this year’s peak on Aug. 4 on concern a plunge in new lending will derail the economic rebound and a flood of share sales will draw funds away from existing equities.
The decline ended a 91 percent rally in 2009 that was driven by optimism the government’s $586 billion stimulus package and more than 1 trillion of new loans would guarantee the economy reached the government’s 8 percent annual growth target. Stocks on the index trade at 31.44 times reported earnings, compared with last year’s low of 12.87 times, Bloomberg data shows.
Steel Prices
Tangshan Steel fell 3.9 percent to 6.63 yuan. Parent Hebei Iron & Steel Group, China’s second-biggest producer, cut October prices for reinforcing bars by 10 percent, according to the Umetal Research Institute. Hebei couldn’t be reached for comment.
Cash rebar prices in China have dropped 23 percent since reaching a more than 10-month high on Aug. 6 after gains this year led buyers to offload high inventories.
Angang Steel Co., China’s second-largest steelmaker by market value, retreated 1.6 percent to 12.09 yuan, capping a three-day, 11 percent slump. Laiwu Steel Corp., owned by China’s sixth-biggest steelmaker, declined 4.6 percent to 10.21 yuan.
The Baltic Dry Index, which tracks transport costs on international trade routes, fell yesterday to its lowest level in more than four months after data showed Chinese demand for coal and iron ore to make steel is tumbling.
Shipping Companies
China Cosco retreated 3 percent to 12.62 yuan. China Shipping Development Co., a unit of China’s second-biggest sea- cargo group, fell 2.6 percent to 12.10 yuan. Cosco Shipping Co., a unit of the largest, slid 4.2 percent to 9.74 yuan.
The country’s iron-ore imports declined 14 percent in August from July and coal imports slid 15 percent, a second consecutive monthly decline, according to customs data yesterday.
China needs to maintain a proactive fiscal policy and moderately loose monetary policy to sustain a rebound by the nation’s industries, the Ministry of Industry and Information Technology said yesterday. Industry is at a critical phase, companies lack incentives to invest and weak demand for exports won’t improve quickly, it said.
PetroChina dropped 1.7 percent to 12.77 yuan, extending a three-day, 5.6 percent decline. China Shenhua Energy Co., the nation’s largest coal producer, lost 3.9 percent to 30.70 yuan.
Crude oil fell as much as 0.9 percent in after-hours trading in New York.
Stock Accounts
An 11 percent rebound on the Shanghai Composite this month through Sept. 18 lured investors to open more accounts to trade stocks for the first time in seven weeks. Individual investors opened 345,844 accounts last week, data from the nation’s clearing house showed today.
The figure is less than half the 700,000 registered in the last week of July, when investors were rushing to buy equities following the end of a nine-month ban on initial public offerings and a rebound in economic growth.
The securities regulator yesterday gave three companies approval to sell shares on a new Nasdaq-like board for start-ups in Shenzhen. The board will probably raise about 20 billion yuan this year, with trading beginning by the end of October, the Hong Kong Economic Journal reported this week, citing Shenyin & Wanguo Securities.
Chongqing Brewery Co. slumped 6 percent to 20.42 yuan, the most in more than a month, after announcing yesterday evening that 192 million of its shares will become tradable on Sept. 28.
--Zhang Shidong. Editors: Richard Frost, Reinie Booysen
To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net
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