Index fall steepest since Nov

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(China Daily)
Updated: 2009-02-19 07:53

Index fall steepest since Nov

A man reads information on an electronic screen at a brokerage in Shanghai. [Reuters]

China's benchmark stock index fell the most in almost three months over concerns that recent gains were excessive and demand for raw materials will decline further.

Jiangxi Copper Co, China's biggest producer of the metal, retreated 6.3 percent to 16.91 yuan and PetroChina Co, the nation's biggest oil company, lost 4.9 percent to 11.24 yuan after a measure of commodities prices plunged to the lowest level since June 2002.

Shanghai Pudong Development Bank Co and Industrial Bank Co dropped more than 4 percent after Morgan Stanley downgraded its recommendation on the two banks.

The Shanghai Composite retreated by 109.58 points, or 4.7 percent, to 2209.86 at close, the steepest decline since Nov 18 and extending Tuesday's 2.9 percent loss. The sharpest two-day drop in four months pared this year's rally to 21 percent, still the most among 90 benchmark gauges worldwide tracked by Bloomberg.

"Stocks are a bit expensive now after such a rally this year and that has inevitably prompted selling for profit," said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co in Beijing.

The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, declined 4.6 percent to 2275.84.

This year's rally lured the most new Chinese investors to the market in almost 11 months. A total of 427,460 new stock trading accounts were opened last week, according to data from China Securities Depository & Clearing Corp, almost double the number in the previous week and the highest since the five days to March 28, 2008.

Tongling Nonferrous Metals Group Co, China's second-biggest copper producer, fell 5.8 percent to 9.8 yuan. Yunnan Copper Industry Co, the No 3, retreated 4 percent to 14.37 yuan.

China Petroleum & Chemical Corp, Asia's biggest oil refiner, also known as Sinopec, retreated 6 percent to 8.58 yuan. China Shenhua Energy Co, the nation's largest coal producer, tumbled 7.2 percent to 20.9 yuan.

Pudong Bank, the Chinese partner of Citigroup Inc, lost 4.4 percent to 16.99 yuan. Industrial Bank, part owned by a unit of HSBC Holdings Plc, retreated 4.2 percent to 18.98 yuan.

Pudong Bank was lowered to "underweight" from "equal-weight" while Industrial Bank was cut to "equal-weight" from "overweight", according to Morgan Stanley. The brokerage said Chinese banks are facing low margins and slow growth even as credit risks climb.

While stocks may have "further room to run" before the announcement of various stimulus programs and the annual session of the National People's Congress next month, the rally may not be sustainable as "we do not believe it is supported by fundamentals", wrote Steven Sun, HSBC strategist, in a note dated Tuesday.

Agencies

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