China’s stocks declined, driving the benchmark index to a 15-month low, on concern a slowdown in the world’s third-largest economy and fundraising by banks will dent profits and hurt existing shareholders’ stakes. SAIC Motor Corp. paced losses by automakers after China’s passenger-car sales growth weakened in June. China Cosco Holdings Co. fell among transport companies as a measure of commodity-shipping rates extended the longest losing streak since August 2005. Bank of China Ltd. slid 1.5 percent after announcing plans for a rights offer to replenish capital. “There hasn’t been a change in the government’s tightening stance,” said Zhou Xi, a strategist at Bohai Securities Co. “The economy is slowing and pressure on profits will begin to grow.” The Shanghai Composite Index retreated 31,54, or 1.3 percent, to 2,351.36 as of 1:09 p.m., set for the lowest close since April 8, 2009. The gauge fell 6.7 percent last week, the most since February 2009, after manufacturing growth slowed more than economists forecast in June and the Conference Board lowered its April gauge for China’s economic outlook. The CSI 300 Index slid 1.6 percent to 2,495.18. A Chinese services industry index compiled by HSBC Holdings Plc and Markit Economics fell to a 15-month low in June, according to a statement today. Power demand growth will continue to slow “significantly” in July and August after easing “sharply” last month due to lower demand from heavy industries, the Shanghai Securities News reported today, citing energy authorities it didn’t name. Slowing Growth SAIC Motor, China’s largest carmaker, lost 1.9 percent to 12.16 yuan, extending a 38 percent decline this year. Beiqi Foton Motor Co. slumped 3.5 percent to 15.83 yuan. Sales of cars, sport-utility vehicles and multipurpose vehicles to consumers rose 10.9 percent from a year earlier, the China Automotive Technology & Research Center said today. That compares with 34 percent growth in April and 25 percent in May, according to the center. Sales growth slowed as the government tightened credit to control inflation and cool the economy. China Cosco, the nation’s biggest shipping company by market value, fell 2.8 percent to 8.22 yuan, set for the lowest close since January 2009. China Shipping Development Co., which ships crude oil and coal, declined 1.8 percent to 7.86 yuan, a seventh day of losses. The Baltic Dry Index, a measure of commodity-shipping costs, dropped 3 percent to 2,280 points on July 2. The gauge has declined for 26 straight trading sessions and is down 27 percent this year. Annual Losses The Shanghai Composite is the world’s third-worst performing equity market this year with a 28 percent loss on concern tighter rules for the property market and Europe’s debt crisis will slow economic growth. Equities also declined as the nation’s biggest banks announced as much as $45.6 billion in fundraising after extending record loans last year. Losses have sent the benchmark gauge’s price-earnings ratio to 17.4, compared with about 37 times at last year’s August peak. Declines in Chinese stocks may signal the nation’s economic growth is slowing, said Mark Mobius, who oversees about $34 billion in emerging markets as executive chairman of Templeton Asset Management Ltd. in Singapore. The Chinese economy may grow 10 percent “going forward,” though the pace may fall to 9 percent, he told reporters in Paris July 2. Mobius said he’s still buying stocks in China. Goldman Sachs Group Inc. last week cut its 2010 forecast for China’s to 10.1 percent from 11.4 percent. The economy expanded 11.9 percent in the first quarter, the fastest pace in almost three years. Wen Comments China will maintain policy continuity and flexibility to ensure “steady and relatively fast” growth and to balance growth, management of inflation expectations and economic restructuring, Premier Wen Jiabao said July 3 after a visit to businesses in southern Hunan province. Policy makers face increasing “dilemmas” as the effects of the global financial crisis become more severe than expected and worldwide recovery increasingly “zigzags,” Wen was quoted as saying in a statement on the government’s website yesterday. Developers fell after the Securities Times cited Land and Resources Minister Xu Shaoshi as saying property prices are likely heading for a correction. China Vanke Co., the nation’s largest publicly traded developer, slid 0.4 percent to 6.90 yuan. Tianjin Reality Development (Group) Co. dropped 3.4 percent to 4.03 yuan. The government has restricted pre-sales by developers and curbed loans on third-home purchases to curb speculation in real estate. Average property prices in China have risen more than 10 percent from a year earlier for four straight months. Rights Offer Bank of China, the nation’s third-largest lender by market value, dropped 1.5 percent to 3.35 yuan. The Beijing-based lender said on July 2 it plans to raise as much as 60 billion yuan ($8.9 billion) in a rights offer in Shanghai and Hong Kong to replenish capital. The bank will sell as many as 19.56 billion shares in the Shanghai part of the offer. Brokerages fell after China asked the nation’s listed securities companies to strengthen information management for better public monitoring and to prevent conflicts of interest. Citic Securities Co., the nation’s largest brokerage by market value, slumped 2.5 percent to 11.30 yuan. Haitong Securities, the nation’s second biggest brokerage by market value, lost 2.4 percent to 8.93 yuan. The following stocks also rose or fell in China. Stock symbols are in parentheses after company names: Lucky Film Co. (600135 CH), a producer of photographic film and paper, climbed 10 percent to 8.73 yuan, the most since April 2, after saying it will buy production facilities and equipment from an affiliate for 11.4 million yuan. Sanan Optoelectronics Co. (600703 CH), a maker of light- emitting diode wafers, gained 3.5 percent to 40.20 yuan, the most in two weeks, after saying first-half net income may gain more than 240 percent from a year earlier and a unit of the company received 57.6 million yuan in government subsidies for the purchase of equipment from overseas. --Chua Kong Ho. With assistance from Zhang Shidong in Shanghai. Editors: Richard Frost, Linus Chua To contact Bloomberg News staff for this story: Chua Kong Ho in Shanghai at +86-21-6104-7011 or kchua6@bloomberg.net

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