Stocks slide for second day

08:50, January 07, 2011      

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Spooked by concerns over rising inflation, investors dump energy shares

Stocks on the Chinese mainland fell for a second day on speculation the central bank will intensify measures to fight inflation, and after Citic Securities Co said Ping An Insurance (Group) Co may need to raise up to 40 billion yuan ($6 billion).

Ping An, China's second-biggest insurer, slid the most in two months after Citic, the largest brokerage, said the fundraising may cut earnings per share by up to 15 percent. PetroChina Co and China Shenhua Energy Co, the biggest producers of oil and coal, led energy stocks lower after the central bank governor said inflation pressures are rising. GD Midea Holding Co added 1.68 percent after forecasting higher profit.

"The inflation concern is still there and will hold back the performance of stocks," said Zhang Ling, general manager at Shanghai River Fund Management Co. "The fluctuating pattern is expected to continue."

The Shanghai Composite Index dropped 0.51 percent to 2824.20 at the 3 pm close on Thursday. Ping An and PetroChina accounted for about a third of the decline on the measure. The CSI 300 Index fell 0.5 percent to 3159.64, led by energy companies.

The Shanghai gauge has gained 0.6 percent this year after dropping 14 percent in 2010, the worst performer among the 14 biggest world benchmark indices. The government ordered banks to set aside more reserves six times in 2010 and boosted rates twice to tame inflation and curb asset bubbles after record gains in lending and property prices.

Ping An led declines for insurers, dropping 4.14 percent to 52.59 yuan on Thursday, the most since Nov 16. The company may need to raise about 30 billion yuan to 40 billion yuan, reducing earnings per share by between 10 percent and 15 percent, Huang Huamin and Yang Shaohui, analysts at Citic, wrote in a report to clients.

Ping An spokesman said the insurer won't comment on "market speculation" and that it has "nothing to disclose." The company in October reported third-quarter profit dropped 26 percent due to greater reserves, missing analyst estimates.

China Pacific Insurance (Group) Co, the nation's third-largest insurer, slid 1.58 percent to 22.42 yuan on Thursday. China Life Insurance Co, the biggest, reversed an earlier loss of as much as 1.7 percent, gaining 0.33 percent to 21.44 yuan.

"In China, the focus is still on inflation," said Li Jun, a strategist at Central China Securities Holding Co in Shanghai. "The concern has eased a bit, but signals of further monetary tightening are still there."

PetroChina slumped 0.89 percent to 11.14 yuan. Shenhua dropped 1.35 percent to 24.91 yuan. China Coal Energy Co, the nation's second-largest coal producer, slipped 0.72 percent to 11.10 yuan. Industrial and Commercial Bank of China Ltd fell 0.72 percent to 4.16 yuan on Thursday. China Construction Bank Corp dropped 1.51 percent to 4.58 yuan.

Chinese regulators may review lending by the nation's banks on a monthly or even weekly basis this year to ensure loans are extended in a "balanced" way, the Securities Times reported on Thursday, without citing anyone.

Tianjin Quanye Bazaar Group Co, a department store operator, rose by 10 percent to 6.83 yuan on Thursday.

Source:China Daily
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