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KBC-Goldstate sells shares in Chinese commodity firms

(China Daily/Agencies)
Updated: 2010-02-08 10:42

KBC-Goldstate Fund Management Co is selling shares in Chinese commodity producers and adding to cash, hunkering down for further declines in the benchmark index after tighter credit policies spurred a drop of 10 percent this year.

"Most institutional investors think the market will fall further and they feel uncomfortable with the current policies," Larry Wan, deputy chief investment officer at Shanghai-based KBC-Goldstate, a joint venture with Belgium's biggest money manager, said in an interview. "The market could fall to 2,500 or 2,100 at this point. Who knows?"

The Shanghai Composite Index fell 1.9 percent on Friday, adding to this year's loss of 10 percent, making it the seventh-worst performer among the world's 94 benchmarks tracked by Bloomberg. Friday's losses were led by energy and commodity producers amid concern faltering economic growth will prevent the nation's exports from sustaining a recovery.

Chinese stocks have fallen this year on concern the government will tighten monetary policy to curb inflation and asset-price speculation. Wan said he was also now concerned about rising trade tensions between the US and China as each nation threatens to impose retaliatory trade tariffs to support jobs.

"Any marginal factor will have a huge impact now because sentiment is fragile," said Wan, who oversees the equivalent of about $730 million.

China said Friday it will impose anti-dumping measures on imports of some chicken products from the US. Beijing launched the move in response to a US decision to impose tariffs on imports of Chinese tires and a ruling by Congress that effectively bans imports of cooked poultry, James Sumner, president of the Poultry Export Council, said on Sept 14. Ties have further soured over proposed arms sales to Taiwan and President Barack Obama's plans to meet with the Dalai Lama later this month.

Material and energy stocks are the worst performers on the CSI 300 Index in 2010, falling more than 17 percent.