Market sinks at midday as coal producers misfire

By Lydia Chen  |   2008-11-6  |     ONLINE EDITION

A WIDE spread sell-off among coal producers dragged Shanghai’s key stock index down in the morning session today on speculation prices for the power-station and steel-making fuel will continue to fall as the economy slows.

The Shanghai Composite Index lost 2.50 percent, or 43.98 points, to 1,716.63 points at 11:30am.

Losers outnumbered gainers 676 to 135 while 12 did not change.

The Shenzhen Composite Index, which tracks the smaller domestic market, was down 1.89 percent, or 8.92 points, to 461.94 points in the morning session.

China Shenhua Energy Co, the nation's largest coal producer, dropped 4.04 percent to 17.34 yuan (US$2.54). Shanxi Coking Co, the largest publicly traded coke producer in China, retreated 3.54 percent to 3.81 yuan.

Datong Coal Industry Co, China's second-largest coal company by capacity, fell 4.87 percent to 11.13 yuan. China Coal Energy Co, the third largest, retreated 4.14 percent to 6.48 yuan.

Prices for power-station coal may fall further because of a potential oversupply and as the market returns to being driven by demand, currency fluctuations and cost factors rather than by speculative investors, the McCloskey Group said.

Coking coal contract prices are expected to decline 57 percent next year as Asian steel makers cut output because of weakening demand, BNP Paribas SA said in a report today.

Power producers were also lost ground this morning.

Huaneng Power International Inc, the listed unit of China's largest power group, lost 1.90 percent to 6.20 yuan. Datang International Power Generation Co, a unit of China's second-biggest electricity producer, decreased 4.09 percent to 5.86 yuan.