Chinese stocks drop as industrial shares slide

Hong Kong - Chinese stocks edged lower, led by health-care and industrial companies, as investors awaited the release of economic data.

Gains by power producers capped losses.

The Shanghai Composite Index lost 0.5%, paring a decline of as much as 2%, as it headed for the lowest close in two months. A gauge of industrial companies sank the most among industry groups, while Shanghai Electric Power jumped the most since March to lead utility stocks higher.

Data on new loans and money supply may be released as early as today, while reports on industrial production and retail sales are also due this week.

The most recent figures have showed March’s pick up in economic indicators didn’t carry over to April, with manufacturing gauges and trade data missing predictions, while a warning by the People’s Daily about the nation’s high levels of debt have damped hopes for more easing.

Investor interest in the world’s second-largest equity market is turning cold as the Shanghai Composite trails all global benchmark gauges tracked by Bloomberg this year with a loss of 21%.

“It seems the economy will stay at these low levels for a very long time and investors are not expecting further stimulus,” said Steven Leung, an executive director for institutional sales at UOB-Kay Hian Holdings. "People are getting quite nervous about the debt market situation in China."

Purchase denied

The Shanghai measure dropped to 2 822.04 as of 08:08. The Hang Seng China Enterprises was little changed, while the Hang Seng Index declined 0.4%. CK Hutchison headed for its lowest close in three months after European Union regulators vetoed the company’s plan to buy UK carrier O2 for as much as $15bn.

China’s banks probably doled out new yuan loans worth 800 billion yuan in April, down from 1.37 trillion yuan the previous month, while money supply climbed 4.3% from a year earlier, according to economist estimates.

A measure of industrial companies led declines on CSI 300 Index, which slipped 0.1%. Shanghai Waigaoqiao Free Trade Zone Group dropped 3.8% and Spring Airlines retreated 3.4%. A gauge of health-care companies lost 0.8% after jumping 2.4% on Wednesday.

Declines were limited by utility companies, with Shanghai Electric rallying 3.7% and Sichuan Chuantou Energy climbing 3.4%.