China's stocks erase this year's gain after growth target is cut

Investors look at a mobile phone as they have lunch in front of an electronic board showing stock information at a brokerage house in Shenyang, Liaoning province on Feb 5, 2015. China's stocks fell, erasing the benchmark index's gain for the yea
Investors look at a mobile phone as they have lunch in front of an electronic board showing stock information at a brokerage house in Shenyang, Liaoning province on Feb 5, 2015. China's stocks fell, erasing the benchmark index's gain for the year, after the government set the lowest economic growth target in more than 15 years and concern grew new share offerings will divert funds from existing equities. -- PHOTO: REUTERS

HONG KONG (Bloomberg) - China's stocks fell, erasing the benchmark index's gain for the year, after the government set the lowest economic growth target in more than 15 years and concern grew new share offerings will divert funds from existing equities.

The Shanghai Composite Index slid 1.4 per cent to 3,233.58 at 1:53 p.m., heading for its lowest level since Feb. 25. Premier Li Keqiang, speaking at the National People's Congress on Thusrday, set a 2015 expansion goal of about 7 per cent, down from last year's target of 7.5 per cent. The gauge has risen 40 per cent in the past six months and trades at 12.3 times estimated profit for the next 12 months, compared with the five-year average of 10.3, according to data compiled by Bloomberg.

Hong Kong's Hang Seng China Enterprises Index dropped 1.2 per cent, heading for its steepest three-day drop in almost three months. The Hang Seng Index slipped 1.1 per cent. Trading volumes in Shanghai were 7 per cent above the 30-day average for this time of day.

China's fiscal policy will remain proactive and monetary policy prudent, according to a work report Li will deliver to the annual meeting of the legislature in Beijing. The inflation target was set at about 3 per cent and stable growth in aggregate financing will be targeted. It plans to expand M2 money supply by about 12 per cent and targets trade growth of about 6 per cent this year.

"There were no major surprises," said Zhang Zhiwei, Hong Kong-based head of China equity strategy and an economist at Deutsche Bank AG. "The M2 growth target was lower and this suggests there's not a big stimulus coming in."