Stocks drop on tightening concerns

09:15, July 09, 2010      

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Mainland stocks dropped for the first time in three days, led by industrial companies and energy producers, as concern the government will step up tightening measures overshadowed rising earnings.

The Shanghai Composite Index declined 5.97, or 0.3 percent, to close at 2415.15, erasing earlier gains and snapping a two-day, 2.5 percent rebound. The CSI 300 Index slipped 0.2 percent to 2575.92.

Deputy central bank Governor Ma Delun said the People's Bank of China's monetary policy faces many new challenges as its focus moves from money supply to controlling inflation, the Shanghai Securities News reported.

China's wages will increase by an average of between 15 percent and 20 percent annually for unskilled labor in the next five to 10 years, according to Citigroup Inc analyst Eddie Lau on Thursday. The rise in income should boost discretionary spending, benefiting department stores and distributors of appliances, according to the report.

The rate of the tax on oil, gas and coal extractions will be set at 5 percent and will vary across commodities, Du Ying, vice-chairman of the National Development and Reform Commission, said in Beijing on Thursday.

The CSI 300 is in a "good position" to rebound after dropping more than any other Asian stock measure this year, according to technical analysis by Nomura Holdings Inc.

The CSI 300 has touched the bottom band that marked its downward trend this year and may rebound should that band hold, Nomura analysts Kenneth Chan, Tacky Cheng and Desmond Chan wrote in a report on Wednesday.

Hang Seng gains

Hong Kong stocks rose, driving the Hang Seng Index higher for the second time in three days, after a trade group said US retail sales climbed and the International Monetary Fund raised its global growth forecast. The Hang Seng Index climbed 1 percent to close at 20050.56.

Source:China Daily


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