China stocks falter as PBOC move disappoints, growth trails official target, banks slump

Stocks closed near a one-week low as financials and raw-material producers paced losses after PBOC withheld firepower in last week’s easing
GDP report showed growth trailed official target pace as Covid-19 lockdowns unsettled investors

China stock market

Zhang Shidongin Shanghai

Published: 11:02am, 18 Apr 2022

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Stocks in mainland China fell to near a one-week low after the economy grew last quarter at a pace below the national target amid Covid-19 lockdowns, while policy easing signals disappointed investors.

The Shanghai Composite Index retreated 0.5 per cent to 3,195.52 at the close of Monday trading. It has lost 12 per cent this year, the worst among major Asia-Pacific indices. Markets in Hong Kong are closed for a public holiday. Regional indices also weakened as rising commodity prices rekindled inflation concerns.

China Merchants Bank tumbled 7.4 per cent to 43.39 yuan, the most since August 2015, slamming a gauge of financial stocks by 3 per cent. Ping An Bank lost 3.2 per cent to 15.90 yuan and BOC International China slumped 5.7 per cent to 13.28 yuan.

Recent lockdowns will hurt domestic consumption and labour market recovery and “more earnings downgrades are likely,” said Meng Lei, a strategist at UBS in Shanghai. “We think only stronger monetary easing, a rebound in credit growth and property policy loosening would reverse investors’ sentiment.”

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China on Friday lowered banks’ reserve requirement ratio by 25 basis points, the smallest cut in history, as the central bank expressed concerns about global inflation and the pace of US rate increases. The token easing underwhelmed bullish bets for a stronger dose of easing among stock strategists.

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China’s economy expanded by 4.8 per cent in the first three month this year, the statistics bureau said on Monday. While growth exceeded market consensus of 4.2 per cent, it trailed the official annual pace of 5.5 per cent for this year. Gross domestic product expanded 8.1 per cent in 2021.

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Among other major stock movers, energy firms broadly sank 2.6 per cent. Coal producer China Shenhua Energy slid 3.4 per cent to 29.97 yuan and Shaanxi Coal Industry fell 2.6 per cent to 17.09 yuan.

Elsewhere, Shanghai reported the first fatalities from the latest wave of Covid-19 cases, all of whom were unvaccinated residents aged from 89 to 91 with underlying ailments. Daily infections still topped 20,000 cases on Sunday, with the commercial hub still in citywide lockdown.

The local authorities published plans to restart production in the city in efforts to restore manufacturing capacity and repair broken supply chains. Businesses should plan for “closed-loop management,” they added.