Chinese stocks plunge as economy moderates

China's economy appears to be moderating. AFP/CNA reports:

China's economy...grew by 11.5 percent in the third quarter and the first nine months of 2007, compared with the same periods a year earlier, the National Bureau of Statistics said...

As evidence of a slight slowdown, Li of the statistics bureau pointed out that economic growth in the second quarter had been 11.9 percent, while inflation in September was 6.2 percent, down from 6.5 percent in August...

The bureau confirmed that fixed-asset investments expanded by 25.7 percent in the first nine months of 2007 from the same period a year ago.

The figure marked a wafer-sized easing from the first half of the year, when investments in fixed assets were up 25.9 percent.

Fears of further tightening from policy-makers, however, led to a plunge in the Chinese stock market yesterday. Bloomberg reports:

The CSI 300, which tracks yuan-denominated A shares listed on China's two exchanges, declined 254.22, or 4.6 percent, to 5,333.79 at the close, the biggest slide since Sept. 11. It was the biggest fluctuation among equity markets included in global benchmarks. Among the measure's 300 members, 266 fell. All 10 of the benchmark's industry groups dropped.

But there remains an undertone of optimism about the prospects for Chinese stocks. From Reuters:

Eight local analysts surveyed by Reuters this week predicted [Shanghai's main] index, which was at 5,633 points at midday on Thursday, would close this year around a median of about 6,000. All but one forecast a rise to about 8,000 by next June...

"The bull run is far from over. Rapid growth in the economy and corporate earnings offsets part of the pressure from high valuations," said Wu Haijun, an analyst at Power Pacific Corp. of Canada.

Perhaps there is still just too much liquidity flowing around. Bloomberg reports that crude oil prices are also back on the rise.

Crude oil rose to a record above $91 a barrel in New York on an unexpected drop in U.S. stockpiles and concern that supply from the Middle East may be disrupted.

Elsewhere, US stocks were little changed even as yesterday's data showed that US housing remains shaky while manufacturing's ability to offset the housing weakness remains uncertain. Reuters reports:

The Commerce Department said new single-family home sales rose 4.8 percent in September to an annual rate of 770,000 units from a downwardly revised 735,000 pace in August...

Thursday's housing data had little impact among U.S. Treasury traders who expect a modest, 25 basis point cut in a key interest rate when Federal Reserve policy-makers meet next week. Stocks, too, were little changed as the Dow Jones industrial average was down 3.33 points and the Standard & Poor's 500 index was down 1.48 points on the day. The dollar fell near an all-time low against the euro as investors debated the size of an expected Fed interest rate cut...

Durable goods orders fell 1.7 percent in September on the back of a sharp drop in transportation orders...after a 5.3 percent decline in August...

Initial claims for state unemployment insurance benefits totaled 331,000 in the week ended October 20 following the prior week's upwardly revised 339,000, which originally had been reported as 337,000...

Europe economy is also seeing increasing signs of slowing, with Germany's IFO business confidence index falling to a 20-month low of 103.9 in October from 104.2 in September and INSEE's index of French business confidence falling to 108 in October from a revised 109 in September.