US jobs data drags China stocks to lowest in six months

Singapore: China’s stocks fell the most in six months after the nation’s non-manufacturing industries expanded at a slower pace for a second month and fewer US jobs were added than economists estimated.

PetroChina, the second-largest oil refiner, dropped to a record low as the Shanghai Securities News reported fuel prices may be cut and JPMorgan Chase & Co lowered its estimate for China’s gross domestic product for the second time in a month.

Sany Heavy Industry, China’s biggest machinery maker, declined 4.4 per cent after Nomura Holdings reduced its outlook for the industry.

“There’s a lot of psychological pressure among investors with the weak non-manufacturing data in China and global issues such as US data and the euro crisis dragging on stocks,” said Tang Yonggang, an analyst at Hongyuan Securities in Beijing.

“We are hoping for more stimulus measures in June and are anticipating reserve-ratio cuts or even interest-rate cuts this month to boost the economy.”

The Shanghai Composite Index fell 64.89 points, or 2.7 per cent, to 2,308.55 at the close, the biggest drop since November 30.

About 7.77 billion shares changed hands on June 1, 3 per cent lower than the daily average this year. The CSI 300 Index retreated 2.8 per cent to 2,559.03, the largest decline since March 28.

The Bloomberg China-US 55 Index, the measure of the most-traded US-listed Chinese companies, tumbled 3.4 per cent to 87.22 on June 1 in New York, the biggest slump since November 21.

Today’s losses pared the Shanghai Composite’s gains this year to 5 per cent.

The index has rebounded from two years of losses on optimism the government will ease monetary policies and accelerate approvals of infrastructure projects to spur growth.

Stocks in the measure are valued at 10 times estimated earnings, compared with a record low of 8.9 times on January 6, according to weekly data compiled by Bloomberg.

Slowdown spreading

The purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement yesterday in Beijing.

That’s the lowest reading since March 2011 when the federation started seasonally adjusting the data. A reading above 50 indicates expansion.

“The data reinforce the message that the slowdown has spread from the manufacturing sector to the services sector,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore.

“The current slowdown is more complicated to read than the 2008 global financial crisis and is stressing the authorities’ vaunted fine-tuning skills.”

Service industries now account for 43 per cent of the economy, the federation said in yesterday’s statement.

The manufacturing PMI compiled by the statistics bureau and logistics federation expanded at the slowest pace since December, according to a June 1 report.

Growth estimates

JPMorgan cut China’s 2012 growth forecast to 7.7 per cent from its previous estimate of 8 per cent, citing increasing downside risks in the euro area.

This comes after it cut the estimate to 8 per cent from 8.2 per cent in a May 2011 note.

A gauge of energy producers in the CSI 300 fell 3.9 per cent, the most among 10 industry groups. China Shenhua Energy, the largest coal producer, slid 2.6 per cent to 25.21 yuan.

Yanzhou Coal Mining declined 3.9 per cent to 21.91 yuan.

The benchmark power-station coal price at Qinhuangdao port fell the most in five months as a slowdown in the world’s second-biggest economy cut demand for electricity and caused stockpiles across the country to surge.

PetroChina declined 1.7 per cent to 9.30 yuan, a record low.

China Petroleum & Chemical Corp, the largest Chinese refiner known as Sinopec, fell 3.1 per cent 6.49 yuan.

China may cut gas and diesel prices by about 700 yuan per ton, the Shanghai Securities News said, citing industry website Chem99.com.

Europe debt

Sinopec’s losses from refining increased 16-fold in the first quarter from a year earlier and PetroChina’s operating losses widened as the government capped fuel-price increases.

German Chancellor Angela Merkel meets fellow coalition leaders today after opposing joint debt sharing in the euro area.

Europe is China’s biggest export market, making up about 18 per cent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities.

Sany Heavy dropped 4.4 per cent to 14.26 yuan. Zoomlion Heavy industry Science and Technology, the second-biggest construction machinery maker, slid 3.6 per cent to 10.61 yuan.

Nomura said excavator-industry sales to China will fall 27 per cent in 2012, compared with a prior estimate of a 12 per cent decline, as fixed-asset investment will be weaker-than-expected.

Chinese equities traded in New York fell the most in six months on June 1, as SouFun Holdings sank to a one-week low after data indicated housing prices fell and manufacturing slowed in the world’s second-largest economy.

Housing prices

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the US, tumbled 2.4 per cent to $32.69, following a 12 per cent decline in May.

The Standard & Poor’s 500 Index of US shares slumped 2.5 per cent to 1,278.04 as US employers in May added the fewest workers in a year.

Payrolls climbed by 69,000 last month, less than the most pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labour Department figures showed yesterday in Washington. The median projection called for a 150,000 May advance.

The jobless rate rose to 8.2 per cent from 8.1 per cent.

SouFun, owner of China’s biggest real estate website, lost 5.3 per cent to $14.94 in New York trading on June 1, the lowest since May 25, after sinking as much as 10 per cent. American depositary receipts of Shanghai-based E-House China Holdings decreased 5.7 per cent to $5.14, extending their three-day loss to 16 per cent.

Home prices

China’s home prices declined 0.3 percent from April to 8,684 yuan per square metre, SouFun said in an e-mailed statement June 1, based on its survey of 100 cities in the country.

That’s the lowest since January 2011 and the ninth month-on-month drop, the longest stretch since it started compiling the data in July 2010.

China’s stocks “are two to four weeks away from the bottom before a significant rebound,” Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees more than $1.6 billion, said by phone June 1.

“There is strong evidence the Chinese domestic economy is decelerating. There’s a race between data in China and government action.”