China stocks head for worst quarter since 2008 on slowdown fears

An man walking past an electronic board showing stock information at a brokerage house in Jiujiang, China.
An man walking past an electronic board showing stock information at a brokerage house in Jiujiang, China.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - China's stocks fell, sending the benchmark index toward its steepest quarterly loss since 2008, as concern about the nation's economy deepened ahead of the start of a week-long holiday this week.

The Shanghai Composite Index slid 1.6 per cent to 3,052.56 at 9:31 am local time, extending losses in the last three months to 28 per cent. Material companies led declines, with Jiangxi Copper Co. slumping 2.2 per cent. Trading volumes in Shanghai plunged 46 per cent before the National Day holiday that starts on Oct 1.

The Shanghai gauge has fallen 41 per cent since the June peak as leveraged investors fled the stock market amid concerns valuations weren't justified amid a weakening economy. Data on Monday showed industrial profits dropping the most in at least four years, while an official manufacturing report scheduled for Thursday will likely a show a contraction.

The CSI 300 Index fell 1.2 per cent. The Hang Seng China Enterprises Index plunged 3.8 per cent in Hong Kong, while the Hang Seng Index slumped 3.3 per cent to the lowest level since July 2013.

Industrial companies' profits dropped 8.8 per cent to 448.1 billion yuan (S$100.85 billion) last month from a year earlier, the National Bureau of Statistics said on its website. That's the steepest loss since at least October 2011, when the government began releasing monthly data.

Weak economic data and a short-term liquidity drain due to intervention in the currency market have made the chance of a reserve-requirement ratio cut before Thursday "exceptionally high," Douglas Morton, Aviate Global LLP analyst, wrote in a note.

Premier Li Keqiang said short-term ups and downs in the economy won't deter China's reform, according to a Beijing News report posted on the State Council's website.

Margin traders reduced holdings of shares purchased with borrowed money on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange dropping 0.2 per cent to 578.1 billion yuan.