Chinese stocks decline as Premier Li flags pressures on economy

Li Keqiang

China’s equities swung into losses, with industrial stocks leading the retreat, as Premier Li Keqiang flagged downward pressures on the world’s second-largest economy.
The Shanghai Composite Index fell 0.3 percent. Machinery maker Citic Heavy Industries Co. led declines for industrial stocks, while brokerage Shenwan Hongyuan Group Co. dropped after saying its net income nearly halved in the first quarter.
China’s real economy faces multiple difficulties, and the nation will promote supply-side structural reforms to ensure growth is in a reasonable range, Premier Li was cited as saying by China Central Television. Equities in Shanghai surged on Monday, rising the most this month after official data showed producer prices registered their first monthly increase since 2013.
“The market has doubts about the sustainability of a pick-up in the economy and needs to see more data to confirm the trend,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “Particularly after yesterday’s decent run-up, investors are very cautious about buying shares and driving stocks higher.” He is keeping his equity position unchanged at about 50 percent of asset holdings.
China’s leaders are trying to revive the economy amid uncertainty in the currency and equity markets. There have been increasing signs of a turnaround of late, with industrial profits breaking a seven-month run of losses, factory activity rising and the nation’s foreign-
exchange reserves increasing for the first time since October.
The Shanghai Composite fell to 3,023.65 at the close, while the CSI 300 Index dropped 0.4 percent. Hong Kong’s Hang Seng China Enterprises Index climbed 0.4 percent and the Hang Seng Index rose 0.3 percent for a fifth day of gains, the longest winning streak in a year. Trading volumes on the Shanghai index were 17 percent lower than the 30-day average yesterday, while the 30-day volatility fell to the lowest in a year.
Gauges of telecom and industrial stocks lost at least 0.7 percent for the biggest declines among the CSI 300’s industry groups. ZTE Corp. retreated 2.4 percent in Shenzhen. Daqin Railway Co., the operator of China’s biggest coal transport network, lost 2 percent after saying it expects first-quarter net income to fall about 50 percent from a year earlier.
China’s statistics bureau is due to release data on first-quarter economic growth on Friday. Gross domestic product probably expanded 6.7 percent in the January-March period, slowing from 6.9 percent growth in the previous quarter, according to the median estimate in a Bloomberg survey.
Margin traders increased holdings of shares purchased with borrowed money for the first time in three days on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising by 0.5 percent to 512.1 billion yuan (USD79.2 billion). Bloomberg