Chinese energy stocks sunk on Monday on the back of rumors that official Chinese growth projections would be lower than expected.
[caption align="alignright" caption="Rumors of underwhelming Chinese growth for the year 2013 adversely affected Chinese energy stocks"] [/caption]
Chinese markets started the week poorly with the Shanghai Composite ( FXI , quote ) and the Hang Seng ( EWH , quote ) down 0.5% and 0.24%, respectively. While the financial media narrative in the United States this week will revolve around consumer behavior during Black Friday and Cyber Monday, Chinese media is focused on macroeconomic factors.
An unsubstantiated report in local paper China Business Daily claimed that the new administration was likely to set its 2013 growth target at 7.5% at an upcoming conference in December. A 7.5% growth rate is not only the same as in 2012, and thus represents no discernible increase in growth rate, but is also under the important 8% growth rate long-heralded by the government and observers alike as psychologically and socially significant.
As a result of this underwhelming projection, Chinese energy stocks suffered. In particular, Chinese energy stocks were adversely affected by the abovementioned article. Traders sold-off a number of equities with exposure to domestic energy, operating under the assumption that tempered growth would weigh on energy consumption going forward.
Specifically, large cap energy stocks like PetroChina ( PTR , quote ) dropped almost 1% in Hong Kong trading while Sinopec (SHI, quote) fell 0.8% in Shanghai.
Smaller energy firms didn't fare much better; Oriental Energy fell 4.2% in Shenzhen trading and oil and gas firm Zhejiang Haiyue fell 3.8% in Shanghai.
Over the medium-term, Chinese markets will have limited upside as long as its two largest trading partners, the European Union and the United States, remain constrained by their respective economic problems. However, a permanent agreement between the Republicans and Democrats over the fiscal cliff would buoy the American economy, and, in turn, the Chinese economy. Until then, Chinese energy stocks are likely to be range-bound.
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