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Stocks edge down as heavyweights plunge

(China Daily/Agencies)
Updated: 2009-08-28 08:13

China's benchmark stock index fell, led by raw-material producers, after the government said it might curb overcapacity in industries including steel and cement.

PetroChina Co, the world's most valuable company, slid 2.7 percent on concerns that industrial curbs will reduce the demand for energy. Aluminum Corp of China Ltd, the nation's largest producer, dropped 3 percent after it said Chinese smelters and trade warehouses hold as much as 600,000 metric tons of inventories because of surplus output.

GD Midea Holding Co, China's second-biggest publicly traded appliance maker, climbed 6 percent after saying first-half profit rose.

About two stocks rose for each that fell on the Shanghai Composite Index, which lost 0.7 percent to 2,946.40 at the close. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, slipped 0.5 percent to 3,156.30.

The State Council said it is analyzing restrictions on industry overcapacity as policymakers seek to rein in investment growth fueled by credit expansion.

"The market is afraid it's a sign of tightening, but in the long run the curbs will benefit listed companies as most of them are leaders in their industries," said Zhang Xiuqi, a Shanghai-based strategist at China International Fund Management Co, which oversees about $10.2 billion.

The Shanghai Composite is down 14 percent this month, the world's worst performer, amid speculation the government will curb lending that rose to a record in the first half.

Related readings:  China's stocks fall on government's overcapacity restraint  Stocks fall as Wen says economy faces uncertainties  'Animal spirits' driving stocks  Stocks rise, led by metal producers

The State Council said on its website on Wednesday it will increase "guidance" over parts of the coal, glass and power industries. Controls on stock and bond sales by companies in targeted sectors will be strengthened, it said.

PetroChina dropped 2.7 percent to 14 yuan ($2.05). China Shenhua Energy Co, the nation's biggest coal producer, lost 3 percent to 32.37 yuan. The two stocks accounted for about 70 percent of the decline in the Shanghai index yesterday.

Crude oil slipped 0.9 percent to $71.43 a barrel in New York on Wednesday, the lowest settlement since Aug 18. Aluminum Corp of China, also known as Chalco, declined 3 percent to 14.61 yuan.

"This is tightening but it's not a total shutdown," said Ken Peng, an economist with Citigroup Inc.

"Policy hasn't reversed but they are contemplating moves that have a lesser impact on the broader economy."

Midea climbed 6 percent to 16.91 yuan after saying first-half net income rose 19 percent from a year earlier. Air China Ltd, the nation's largest international carrier, jumped 5.2 percent to 8.33 yuan, a second day of gains after saying first-half profit more than doubled.