April 19 (Bloomberg) -- China's stocks fell, set for their biggest fall in seven weeks, on speculation delayed economic reports to be released today will lead to higher interest rates. China Vanke Co. declined.
``The market is concerned that the GDP and other economic figures will be stronger than expected and prompt the government to raise interest rates,'' said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``That's providing a good excuse to sell shares in a market that has risen so much.''
The benchmark CSI 300 Index, which tracks yuan- denominated A shares listed on China's two exchanges, dropped 89.90, or 2.7 percent, to 3214.60 as of 11:30 a.m. local-time break, set for the biggest decline since March 1. The gauge had risen 62 percent this year as of yesterday.
The 14-day relative strength measure for the 300 index, a moving average based on whether the gauge rose or fell, was at 88 yesterday. A reading above 70 signals to some analysts the index is poised to fall.
China has postponed the announcement of its first-quarter gross domestic product until 3 p.m. in Beijing today from 10 a.m., according to the State Council. That may indicate it is preparing to report faster-than-expected growth, economists said.
Higher interest rates curb corporate earnings by raising borrowing costs.
China Vanke, the nation's biggest property developer, slid 0.98 yuan, or 5.2 percent, to 17.78. Citic Securities Co., China's biggest publicly traded brokerage, dropped 1.57 yuan, or 3.2 percent, to 47.90.
Sinopec, China Merchants
China Petroleum & Chemical Corp., Asia's biggest oil refiner, also known as Sinopec, declined 0.48 yuan, or 4.2 percent, to 10.92. China Merchants Bank Co., the nation's third-biggest publicly traded lender, lost 0.39 yuan, or 2 percent, to 19.13.
China's gross domestic product expanded 10.4 percent from a year earlier, according to the median estimate of 24 economists surveyed by Bloomberg News. The economy grew 10.7 percent in 2006, the fastest growth since 1995.
China's consumer price index, a key indicator for inflation, accelerated to 3.3 percent last month, the China Securities Journal reported on April 10, citing unidentified people. The median estimate in a survey by Bloomberg News is 2.7 percent. Consumer prices rose 2.7 percent in February from a year earlier after gaining 2.2 percent in January.
`Torrid Figures'
``This reinforces our suspicion that the first-quarter figures will be torrid,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. If today's inflation number is higher than expected, ``the bank could raise interest rates as soon as tonight,'' he said.
The yield on the benchmark seven-year government bond yesterday rose 9 basis points, or 0.09 percentage point, to close at 3.35 percent, a two-month high, according to China interbank bond market.
China's central bank on April 5 ordered banks to set aside more money as reserves for the sixth time in less than a year to slow inflation as economic growth shows no sign of moderating. It also raised interest rates last month to an eight-year high.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, slid 2.4 percent to 3526. The Shenzhen Composite Index, which covers the smaller one, retreated 2.9 percent to 980.52.
Elsewhere, ZTE Corp., China's biggest publicly traded phone-equipment maker, added 0.05 yuan, or 0.1 percent, to 48.15. The company increased profit for the first time in four quarters as the company won more contracts from carriers outside its home market. Fourth-quarter net income rose 1.4 percent to 357 million yuan ($46.2 million) from 352 million yuan a year earlier.
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China's Economy Surges at Faster-Than-Forecast 11.1%
April 19 (Bloomberg) -- China's economy grew at a faster- than-forecast 11.1 percent pace in the first quarter from a year earlier, raising the likelihood the government will increase interest rates to curb the risk of overheating.
Growth accelerated from 10.4 percent in the previous quarter, the statistics bureau said in Beijing today. China's benchmark stock index fell 4.7 percent before the release, triggering declines in Asian and European shares, on speculation borrowing costs will rise.
Premier Wen Jiabao said the government will take steps to curb lending and investment in factories and property and rein in the record trade surplus. Inflation accelerated to 3.3 percent, the fastest pace in more than two years, and breached the central bank's 3 percent target for the year.
``Growth has been driven by continuing strength in investment and continuing strength in politically sensitive exports,'' said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong. ``China needs to cool profits and the easiest way to do that would be to allow the yuan to appreciate at a faster rate.''
China's expansion beat the 10.4 percent median estimate of 24 economists surveyed by Bloomberg News.
The benchmark CSI 300 stock index fell the most since the 9 percent plunge on Feb. 27 that triggered a global equities rout. The index has since gained 28 percent.
Yuan Forecast
The yuan traded at 7.7168 against the dollar as of 5.11 p.m. in Shanghai, almost the strongest since a peg was scrapped in 2005. After the release, Goldman Sachs Group Inc. forecast the currency will gain 9 percent in the next year.
``Loan growth is too fast, there is pressure for fixed- asset investment to rebound and the trade surplus continues to increase,'' Premier Wen Jiabao said in a statement on the government's Web site. ``China will keep strengthening control on investment, loans and growth in the trade surplus and maintain stable prices.''
Urban investment in factories and real estate jumped 25.3 percent in the first quarter from a year earlier, accelerating from 24.5 percent for all of 2006. The increase was 29.8 percent in the same period last year.
JPMorgan Chase & Co. raised its estimate for China's growth this year to 10.8 percent from 10 percent on today's release. That would beat last year's 10.7 percent and be the biggest expansion since 1995. Standard Chartered Plc's new estimate is 10.6 percent, up from 9.7 percent.
Banks' Reserves
``The government measures to slow growth had no effect in the first quarter and shares have risen too much,'' said Paul Tang, an economist at Bank of East Asia Ltd. in Hong Kong. ``The central bank will probably keep increasing banks' reserve requirements and raise interest rates three times this year.''
The U.S. last week filed World Trade Organization complaints against China and lawmakers claim the yuan is kept weak to make exports cheap. The currency, allowed to move 0.3 percent against the dollar each day, has gained 7.2 percent since the peg was scrapped.
Treasury Secretary Henry Paulson last week called on China to let the yuan strengthen. China limits gains to protect exporters and jobs. The textile industry says it loses 8.2 billion yuan of annual profit for each percentage point gain.
Currency Reserves
China's foreign reserves grew by $45 billion a month to $1.2 trillion in the first quarter, double the average monthly increase of the past three years, according to calculations by HSBC Holdings Plc.
The jump may be partly explained by Chinese companies bringing home the proceeds of initial public offerings and banks unwinding their foreign currency positions, according to Qu Hongbin, chief China economist at HSBC in Hong Kong.
``The fact that Chinese companies have been rushing to bring in foreign currency and banks are unwinding their foreign currency positions shows that expectations about renminbi appreciation have increased significantly over the last few months,'' Qu wrote in a note.
Retail sales grew 15.3 percent in the first quarter from a year earlier, the statistics bureau said.
``Exports and investment cannot carry on rising at the current rate,'' said Mark Williams, Asia economist at Capital Economics Ltd. in London. ``China has to boost consumption, balance growth and remain active in keeping liquidity steady.''
China's economic structure is ``irrational,'' the statistics bureau said in today's statement.
Stock Speculation
Surging overseas sales that drove the trade surplus to $177.5 billion in 2006 provide cash for stock market and real estate speculation and factory investment.
Individual investors are opening share trading accounts at a record rate, with more than 1 million added last week, the Financial Times reported today, without citing anyone.
Manufacturing overcapacity may lead to deflation and turn investment growth into a ``curse,'' the Asian Development Bank said last month. The nation's steelmaking capacity of 462 million metric tons at the end of 2006 was 10 percent more than production.
The central bank raised borrowing costs three times in the past year to an almost eight-year high. The one-year benchmark lending rate is 6.39 percent.
It has raised the amount of money lenders must set aside as reserves six times in 10 months and sold bills to soak up cash. That hasn't cooled lending growth. Banks made 1.4 trillion yuan of new loans in the first quarter, nearly half the total for last year.
China also uses administrative measures, such as land controls and environmental and energy-use hurdles to cool investment.
U.S. stocks pointed to a lower opening Thursday, a day after the Dow Jones industrials closed at a new high, as investors in China sold off stocks amid concerns the country's economy might be growing too quickly.
Stocks fell in China and then Europe following word that growth in China's first quarter jumped a higher-than-expected 11.1 percent and inflation increased at its fastest pace at more than two years. The increases stirred speculation that Chinese officials will take steps such as raising interest rates to curb growth.
While China's sometimes volatile Shanghai Composite Index tumbled 4.5 percent, its decline wasn't as steep as the nearly 9 percent drop Feb. 27 that touched off a worldwide selloff and shaved more than 3 percent from the major U.S. indexes. Stocks fell in Europe Thursday, though at more modest levels than in Asia.
Ahead of Thursday's market opening, Dow Jones futures expiring in June fell 72 points, or 0.56 percent, to 12,786. The Dow has gained in 14 out of the last 15 trading sessions.
The Standard & Poor's 500 index futures fell 8.80, or 0.59 percent, to 1,471.50. The S&P hit a new 6 1/2-year high Wednesday.
The Nasdaq 100 futures fell 12.25, or 0.66 percent, to 1,836.00.
Looking abroad, Japan's Nikkei stock average fell 1.67 percent. Britain's FTSE 100 fell 0.52 percent, Germany's DAX index fell 1.13 percent, and France's CAC-40 fell 0.74 percent.
In addition to concerns about Asia, U.S. investors will be reviewing a mix of corporate profit reports as they try to determine where stocks are headed.
EBay Inc.'s first-quarter results, which showed a 52 percent surge in profit, came as a pleasant surprise after the market closed Wednesday, but Nokia Corp., the world's largest mobile phone maker, said Thursday that first-quarter net profit declined by 6.6 percent due to slipping handset prices. Investors still have a heavy schedule of other tech earnings ahead of them: Google Inc., Advanced Micro Devices Inc. and First Data Corp.
Merrill Lynch & Co. reported better-than-expected results for its first quarter.
However, most big companies' earnings have been surprisingly strong this week. On Thursday, investors hoping to see robust earnings from Dow component Altria Group Inc. may be in for a disappointment.
First-quarter income from Altria, owner of cigarette maker Philip Morris, fell by 21 percent as it saw weakness in domestic cigarette sales. The company raised its full-year earnings prediction, however, which may offset some of the negative news.
Beyond earnings, gold prices edged lower, while the dollar only rose slightly against the euro and the British pound. The euro is less than a cent away from all-time high against the dollar, and the British pound is trading at 26-year highs versus the U.S. currency.
Most major U.S. companies - even those reporting drops in first-quarter profit - have been exceeding the forecasts of analysts, who reined in their expectations after the stock market plunged in late February amid worries about tumbling markets overseas, the weakening dollar, financial troubles in subprime lending, and the possibility of a recession.
On Thursday, UnitedHealth Group Inc., the nation's second-largest health insurer, said its first-quarter profit rose 4 percent, beating analyst predictions. Pharmaceutical company Wyeth's 12 percent rise in first-quarter profit also surpassed expectations.
Schering-Plough Corp. said its first-quarter profit soared 55 percent, boosted by strong demand for its Remicade drug and other products. Their results beat Street forecasts.
CBOT Holdings Inc., the holding company for the Chicago Board of Trade, said its first-quarter profit climbed 58 percent due to higher trading volume and higher average exchange fee rates. The company's results beat expectations.
Late Wednesday, Kraft Foods Inc., the world's second-largest food and beverage maker, said its first-quarter profit fell 30 percent, but excluding certain items the report was better than analysts predicted.
In economic data Thursday, the Conference Board will release its March leading economic indicators, and the Philadelphia Federal Reserve will report on manufacturing activity in the region. Analysts are expecting both reports to show improvement from the previous month.
Oil prices were little changed, with a barrel of light sweet crude slipping a penny to $63.12 a barrel in electronic premarket trading on the New York Mercantile Exchange.
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