Shanghai Composite Index dragged below 2,000 as China’s stocks fall

China’s stocks fell, dragging the Shanghai Composite Index below 2,000 for the first time in almost six months, as factory output and business spending slowed while concern grew that share sales would divert funds.

China Shenhua Energy Co., the nation’s largest coal producer, slid 1% to a record low as Beijing and Shanghai stepped up measures to curb pollution. Anhui Conch Cement Co., the biggest cement producer, tumbled more than 3% in Hong Kong and Shanghai. Neway Valve (Suzhou) Co., which surged 43% last week in its market debut after an initial public offering, plunged 10%. Leshi Internet Information & Technology (Beijing) Co. retreated 4.2%.

The Shanghai index rose above 2,000 in February 2009 after a 4 trillion yuan ($661bn) economic stimulus plan fuelled a bull-market rally.

It held above that level until Sept 2012, when concerns about share oversupply sparked a sell-off. The securities regulator halted IPOs the next month, a postponement that lasted until Nov 2013.

“For the time being, I don’t see any signs the index will gain strongly amid the new IPOs,” said Zeng Xianzhao, an analyst at Everbright Securities Co.

China’s economy grew 1.8% from the previous quarter, compared with a 2% median estimate of economists and 2.2% in the July-Sept period.

GDP expanded 7.7% in 2013, the statistics bureau said, the same pace as in 2012.

The economy is forecast to expand 7.4% this year, according to an analyst survey last month, the slowest pace since 1990.

Industrial production rose 9.7% in Dec from a year earlier. That compared with the 9.8% median forecast of analysts and a 10% gain in Nov. Fixed-asset investment excluding rural households increased 19.6% in the Jan-to-Dec period from a year earlier.

That compared with the 19.8% median estimate in a Bloomberg survey and a 20.6% pace in 2012.

“Growth momentum is clearly weakening,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong.

“The slowdown became increasingly clear as the quarter progressed.”

The benchmark seven-day repurchase rate jumped 137 basis points to 6.54%, the highest intraday since Dec 24, as demand for cash spiked before the Chinese New Year holidays and as banks parked corporate tax-payment funds with the central bank.

The nation’s financial markets are closed from Jan 31 through to Feb 6 for the New Year holidays.

China Shenhua Energy lost 1% to 14.09 yuan, the lowest level since 2007. Coal miner Guanghui Energy Co. slumped 1.6% to 6.90 yuan.

(Bloomberg)