China’s benchmark stock index fell for a second day after a report showing industrial companies’ profits dropped the most in at least four years added to concern the economic slowdown is deepening.
The Shanghai Composite Index slipped 0.2 percent to 3,087.23 at 1:04 p.m., heading for the lowest close since Sept. 17. Industrial companies’ profits plunged 8.8 percent in August, compared with a 2.9 percent drop in July. PetroChina Co. and China Shipbuilding Industry Co. retreated at least 1.1 percent to lead declines for energy and industrial shares.
“The industrial profit figure was well below the market consensus figure and is likely to add some downward pressure to today’s session,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai. “There is little activity on the market with a long holiday coming later this week.”
Trading volumes in Shanghai plunged 52 percent below the 30-day average before a week-long holiday that starts on Oct. 1, while Hong Kong’s market was shut Monday for the mid-Autumn festival.
The Shanghai gauge has fallen 3.5 percent this month through Friday, extending declines this quarter to 28 percent for the worst three-month period since March 2008. China’s stocks have tumbled as leveraged investors fled the stock market amid concerns valuations weren’t justified amid a weakening economy.
Industrial companies’ profits dropped 8.8 percent to 448.1 billion yuan last month from a year earlier, the National Bureau of Statistics said on its website. That’s the steepest loss since at least October 2011, when the government began releasing monthly data. Profits in coal mining plunged 64.9 percent, while oil and gas profits tumbled 67.3 percent, according to the report.
Coupled with overcapacity and deflation, slumping profits are the latest sign China’s 2015 growth target of 7 percent is at risk. Preliminary data this month showed a factory gauge falling to the lowest level since the depths of the global financial crisis, while economists surveyed by Bloomberg expect the government will further cut its growth forecast next year.
The CSI 300 Index was little changed, as losses for energy, industrial and financial shares overshadowed a rally for technology companies. China Railway Group Ltd. slumped 1.7 percent. China Everbright Bank Co. fell 3.6 percent after it said it will raise HK$19.6 billion ($2.5 billion) to replenish core capital by selling new Hong Kong-listed shares to its parent.
Leshi Internet Information & Technology Corp., the biggest mainland-listed Internet video provider, gained 8.4 percent.
Shanghai’s margin debt fell to a nine-month low on Friday, dropping 1.5 percent to 579.2 billion yuan for a third day of losses.
Courtesy: Bloomberg Business 28 September 2015