China’s stocks fell, driving down the benchmark index for a sixth week out of seven, on concerns surging lending costs will make it difficult for companies to borrow for expansion and new regulations may limit car sales.
SAIC Motor Corp., the biggest publicly traded automaker, fell to the lowest since August after Beijing city announced measures to restrict the number of new vehicles. Jiangxi Copper Co. paced declines for commodity producers, as metal prices retreated. China Vanke Co., the biggest developer, surged more than 2 percent after Guotai Junan Securities Co. predicted a 25 percent rebound for property stocks by the middle of January after they plunged this year on policy tightening measures.
“It won’t be a surprise if the government announces further reserve ratio or interest-rate hikes by the year end as curbing inflation is the top priority for decision makers at the moment,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “The market is also suffering from a liquidity crunch approaching the year end and that will keep it fluctuating for the short term.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 7.7, or 0.3 percent, to 2,847.45 at 10:12 a.m. The CSI 300 Index fell 0.3 percent to 3,178.55, led by metal and energy producers.
The Shanghai Composite, the worst performer among major Asian benchmarks this year, has fallen 13 percent in 2010 on concern the central bank will raise interest rates for a second time since October as part of policy tightening measures to slow inflation that reached a 28-month high last month.
Auto Stocks
SAIC Motor lost 1.7 percent to 15.73 yuan, set for the lowest close since Aug. 26. Beiqi Foton Motor Co. dropped 1.8 percent to 25.60 yuan.
Beijing introduced measures including limiting the number of new passenger vehicles in the Chinese capital to ease congested roads. The government will issue a quota of 240,000 new vehicle license places through a lottery system next year, with about 88 percent allocated to individual buyers, according to a statement released yesterday.
Nomura International lowered its forecast for 2011 passenger vehicle sales by 3 percent to 13.4 percent to reflect the potential effects from the policy, Nomura analyst Yankun Hou said in a report today.
“Such measures will have substantial impact on auto sales,” said Hou in the note. “Catalysts will be policy clarifications from central and local governments.”
Jiangxi Copper slid 2.2 percent to 40.40 yuan. Yunnan Copper Industry Co. retreated 1.5 percent to 24.47 yuan.
On the London Metal Exchange, copper for delivery in three months dropped $50, or 0.5 percent, to $9,300 a metric ton （$4.22 a pound）. Nickel, zinc and aluminum also fell in London.
Lending Costs
The government has ordered banks to boost their reserve requirements six times this year to curb loan growth and prevent asset bubbles. The seven-day repo rate, which measures lending costs between banks, jumped 150 basis points to 5.67 percent, the highest level since October 2007, according to yesterday’s daily fixing published by the National Interbank Funding Center.
China’s central bank may differentiate its reserve ratio requirements for financial institutions and include that as one of its monetary policy tools, the National Business Daily reported, without citing anyone.
Under the plan, the People’s Bank of China will require financial institutions with lower capital adequacy ratios and higher operating risks to set aside more deposits as reserves, and the regulator will lower the interest rate paid on such reserves to as low as zero, the report said.
Property Stocks
China’s property stocks may rebound 25 percent from the current level until the middle of January in the absence of further measures to rein in housing prices, according to Guotai Junan Securities.
The rebound may raise developers’ valuations to 13 times estimated earnings for 2011 from the current 10.5 times, Sun Jianping and Li Pinke, analysts at the brokerage wrote in a report today. Investors shouldn’t have high expectations about loosening policy curbs in the short term, because of fast price gains in China’s second- and third-tier cities, the report said.
China Vanke surged 2.2 percent to 9.03 yuan. Poly Real Estate Group Co. climbed 1.9 percentt o 14.16 yuan.
--Irene Shen. Editors: Allen Wan
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