Shares fall along with confidence

By Zhu Shenshen  |   2008-6-24  |     NEWSPAPER EDITION

STOCKS in Shanghai dropped 2.52 percent yesterday as investor confidence weakened over concerns of further tightening in monetary policy and limited positive policies.

The Shanghai Composite Index closed down 71.32 points at 2,760.42, after moving in the range of 2,813.14 and 2,741.19.

Turnover fell sharply to 41.90 billion yuan (US$6.07 billion) from 79.22 billion yuan in the previous session.

"The decreased trade volume shows the loss in confidence as people think another interest rate hike will come," said Qilu Securities in a note.

China's central bank may come up with "stronger policies" to tackle the inflation that stemmed from higher fuel and electricity prices, the bank Governor Zhou Xiaochuan said in the United States.

Meanwhile, Shang Fulin, the chairman of the China Securities Regulatory Commission, said that China will adjust the pace of fund-raising exercises to balance share supply and demand and promote stock market stability.

Dealers, however, remained pessimistic.

"The policy won't bring capital directly into the market and it has a limited effect," said Zhang Qi, an analyst at Haitong Securities.

Blue chips, including banks, properties and energy shares, dropped yesterday.

China Merchants Bank lost 3.61 percent to 23.76 yuan while Industrial and Commercial Bank of China, the country's biggest lender, was down 1.74 percent to 5.09 yuan.

Aluminum Corp of China Ltd, the nation's largest producer of the metal, said its first-half profit will fall more than 50 percent because of higher costs and production disruption. The stock lost 5.24 percent to 12.30 yuan.

Sinopec, the biggest oil refiner, lost 8.89 percent to 11.69 yuan, erasing Friday's rise after the government announced it would raise the price of gasoline and diesel by up to 18 percent.

PetroChina, the largest oil producer and biggest market heavyweight, was down 3.15 percent to 15.36 yuan.

Shanghai Bashi Industrial (Group) Co, the city-controlled bus company, slid the daily cap of 10 percent to 7.65 yuan. The company said yesterday that it plans to sell 8.8 billion yuan in new shares to the Shanghai Automotive Industry Corp in return for its auto parts business.

Gold producers surged yesterday. Zhongjin Gold jumped the daily cap of 10 percent to 46.76 yuan while Shandong Gold also enjoyed a 10 percent rise to close at 47.56 yuan.

Baoshan Iron & Steel Co, China's biggest steel maker, said it will suspend trading of its shares in Shanghai from yesterday pending an announcement of a merger with Guangdong steel makers.