China stocks fell the most in six weeks with the benchmark Shanghai Composite Index losing for a fourth day, falling 1.2 percent on Tuesday to close at 2,272.42.

Stocks fell over uncertainties in demand for consumer appliances in next six months and due to slumping shares in small firms. Analysts said more confidence in macroeconomics may help stocks to rally.

The CSI 300 Index dropped 1.4 percent to 2,565.67, with all 10 sectors falling by at least 1 percent.

"The government stopped giving subsidies for domestic electronic appliances at the beginning of June, which may trigger concerns over the sale of such products in the next few months," said Guo Jia, an analyst with Aijian Securities.

The official Purchasing Manager's Index for smaller companies for May dropped to 47.3, about 0.3 percentage points lower than for April. The PMI for bigger companies rose slightly to 51.1 for May, 0.1 percentage points higher than that for April, according to National Bureau of Statistics data.

However, the HSBC flash PMI fell to a seven-month low of 49.6 from 50.4, reflecting weaker than expected activity so far this year and the government's determination to tolerate lower growth, a Barclays Research report said.

"Feedback during our field trip and talks with the manufacturers is that the pick-up in sales, as well as orders, so far in Q2 has been more due to seasonal factors, being weaker this year than previous years," said Jian Chang, analyst with Barclays Research.

"We had been expecting growth stabilization. The mixed May NBS and HSBC PMI made it difficult to gauge the near-term strength and direction of the economy. But it is probably fair to say that growth momentum remains soft amid domestic overcapacity, external weakness, uncertain domestic policy and a lack of new stimulus," Chang said.

People's Bank of China Governor Zhou Xiaochuan said the renminbi won't actively depreciate to regain national competitiveness, suggesting that now may be a good time to promote interest rate reform.

Wu Yinzhou, an analyst with Shanghai-based Fulun Consultancy, said, "Zhou's comments may have an impact on the performance of those listed companies which are export-led."

The Ministry of Commerce has repeatedly expressed concerns about weak exports due to the fast-appreciating yuan.

Guo said: "A better macroeconomic situation and better sales of consumer appliances may help the market to restore confidence, but companies' are facing great pressures to realize their sales goals for the year."

Initial public offerings in China have been suspended since October and more than 200 enterprises have withdrawn their IPO applications since the start of the year.

The securities regulator may start approving IPOs again in mid-August, according to a report in 21st Century Business Herald on May 29.

wuyiyao@chinadaily.com.cn

(China Daily USA 06/05/2013 page14)