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Equities drop for first time in five days

08-17-2011 11:16 BJT

SHANGHAI - Stocks on the Chinese mainland fell, dragging the benchmark index down for the first time in five days on concern the slowdown in the world's second-biggest economy is failing to cool inflation.

Jiangxi Copper Co and China Shenhua Energy Co, the producers of copper and coal, led declines for commodity producers. China Vanke Co slid 1.7 percent after the central bank raised the yield on one-year bills for the first time in seven weeks, signaling higher interest rates. Anhui Conch Cement Co, China's biggest maker of the building material, rose to the highest in a week after first-half profit more than tripled.

"Slowing economic growth and high inflation are still the two biggest concerns for investors," said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co, which oversees $285 million. "The possibility of further rate increases also can't be ruled out."

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, dropped 18.60 points to 2608.17 at its close, halting a four-day, 4 percent gain. The CSI 300 Index fell 0.7 percent to 2897.58.

The Shanghai Composite, which entered a so-called bear market on Aug 8, must break above 2,675, which represents the "swing low" reached in January 2011 and the 20-day moving average, to end its bearish trend, according to Trading Central Asia Ltd.

The Shanghai Composite has slid 7.1 percent this year as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain inflation that quickened to the fastest pace in three years last month. The gauge is valued at 12 times estimated earnings, compared with a record low of 11.9 times for the multiple set in January 2006.

Jiangxi Copper lost 1.5 percent to 33.33 yuan ($5.18). Tongling Nonferrous Metals Group Co, China's second-biggest copper producer, slid 1.9 percent to 25 yuan. Shenhua dropped 0.9 percent to 27.68 yuan.

Growth in China, the world's second-biggest economy, is slowing "significantly", the New York-based research company The Conference Board Inc said on Tuesday. A leading economic index for China rose 1 percent to 158.9 in June, it said. "The economy is significantly moderating right now and also over the next couple of months," Bart van Ark, The Conference Board's chief economist, told Bloomberg. "We still expect it to be pretty much a soft landing."

China's economic growth may slow to 9.2 percent in the third quarter from 9.5 percent in the previous quarter, China Securities Journal reported, citing the State Information Center. Inflation may rise to about 6.2 percent in the third quarter from 5.7 percent in the second quarter, it said.

Foreign direct investment in China rose 19.8 percent in July to $8.3 billion from a year earlier, the Ministry of Commerce said in a statement in Beijing. For the first seven months of the year, the increase was 18.6 percent, it said.

Editor:Yang Jie |Source: China Daily

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