Concern over demand has coal in downswing

By Richard Fu  |   2008-7-31  |     NEWSPAPER EDITION

SHANGHAI stocks edged down yesterday, paring early gains as worries of big cash calls resurfaced.

Coal stocks paced the decline. The Shanghai Composite Index fell 0.48 percent to close at 2,836.67, off an intraday high of 2,894.37.

The Shanghai Securities News said about 300 billion yuan (US$43.95 billion) worth of non-tradable shares will be freed up in August as lockup periods expire, the biggest monthly supply in the second half.

Some analysts said the market wouldn't encounter very sharp rises or falls as authorities have repeatedly said they want stability in the market. Many investors were staying sidelined, as told by the thin turnover.

West China Securities said in a note that as the index has been moving around 2,800 for more than 10 days, there may come a breakthrough late this week or next.

"Despite the slump in crude oil prices and rebound in neighboring equity markets, there has long been such thinking in the weak A share market that you have to sell when it goes high," GF Securities analyst Wan Bing said.

The coal sector, a star performer early this week, fell amid profit taking and on concern lower oil prices will reduce demand for it as an alternative fuel.

China Shenhua Energy Co, the domestic industry leader, shed 2.71 percent to 32.31 yuan. China Coal Energy Co slid 1.97 percent to 13.90 yuan and Yanzhou Coal Mining Co lost 3.94 percent to 19.76 yuan.

But air carriers gained on lower crude. China Eastern Airline Corp increased 4.66 percent to 8.08 yuan while Hainan Airlines Co gained 2.85 percent to 5.42 yuan. Air China Ltd climbed 1.15 percent to 10.59 yuan.

Sinopec Corp, China's dominant refiner, climbed 1.11 percent to 11.82 yuan as weaker crude would help its margins.

PetroChina Co, the nation's top oil producer, dipped 0.13 percent to 15.20 yuan, after reports said it would exit a venture with China National Coal Group for coal-bed methane, or natural gas trapped between coal seams, to develop this business on its own.