Mainland equities decline to a two-year low
SHANGHAI - Stocks on the Chinese mainland fell to their lowest level in more than two years on Tuesday.
The retreat came after Chinese housing sales slumped and ratings companies said last week's European summit did little to resolve the region's debt crisis.
Anhui Conch Cement Co, whose materials are used in property construction, slid 4.5 percent after Fitch Ratings said China faces slower growth in home sales and construction next year. Poly Real Estate Group Co led declines for developers after the nation's biggest real estate website reported housing transactions plunged more than 50 percent in 13 cities out of 35 last week. Jiangxi Copper Co retreated the most this month on concern that faltering growth in Europe will cut demand for raw materials.
"Europe isn't out of the woods and that'll pose a significant threat to China's exports going forward," said Wu Kan, a fund manager at Dazhong Insurance Co, which oversees $285 million. "Forecasts for corporate earnings may still have room for cuts as a result of government tightening measures. The market weakness will persist until the year-end."
The Shanghai Composite Index slumped 42.96 points, or 1.9 percent, to 2,248.59 at the close, the lowest since March 2009 and capping a four-day, 3.6 percent loss. The CSI 300 Index fell 2.3 percent to 2,421.93. The Bloomberg China-US 55 Index, the measure of the most-traded US-listed Chinese companies, retreated 2.4 percent in New York on Monday.
The yuan declined to 6.3673 a dollar in Shanghai, according to the China Foreign Exchange Trade System. A weaker local currency may lead to a flight of capital from the country and weigh on asset prices. China's interest-rate swaps climbed for a second day as the central bank drained cash from the financial system.
Stocks in Asia slumped as Moody's Investors Service said that last week's European Union summit failed to produce "decisive policy measures". Fitch Ratings said a comprehensive solution has not yet been offered and predicted a "significant economic downturn" in the region.
The Shanghai Composite has slipped 3.6 percent this month, as concern about a slowdown in economic growth outweighed the first cut in lenders' reserve-requirement ratios in three years by the central bank on Nov 30.
China may use tax cuts to shore up expansion in the world's second-largest economy next year as export growth weakens and the threat of bad loans from stimulus spending narrows the government's options. The nation's top officials are currently mapping out policies for 2012 at the annual Central Economic Work Conference in Beijing.
Bloomberg News
(China Daily 12/14/2011 page15)
