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Factory statistics, property curbs hit markets

Updated: 2011-07-22 09:29

By Zhang Shidong (China Daily)

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SHANGHAI - Stocks on the Chinese mainland fell for a fourth day after a report showed manufacturing might have contracted for the first time in a year this month and the government expanded measures to prevent a rebound in property prices.

Jiangxi Copper Co dropped 2.8 percent after a preliminary gauge of factory output from HSBC Holdings PLC and Markit Economics slid below the 50 expansion-contraction threshold.

Poly Real Estate Group Co and Agricultural Bank of China Ltd paced declines for financial companies after the banking regulator said it will closely monitor the risks of real-estate loans.

Property stocks were also affected by a report in the Shanghai Securities News that up to 20 more cities might limit home purchases.

"The government's determination to stem gains in property prices looks very firm and that's why heavily weighted stocks like banks and developers are not performing very well," said Zhang Ling, general manager at Shanghai River Fund Management Co.

"The economy is slowing down and inflation is still high. That's bad for stocks."

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, slipped 28.31 points to 2,765.89, the biggest decline since July 12. The CSI 300 Index declined 1.1 percent to 3,059.14.

The Shanghai gauge has lost 1.5 percent this year on concern the government's efforts to curb inflation will hurt economic growth. The central bank has raised interest rates five times and the reserve-requirement ratio 12 times since the start of 2010 to stem inflation.

Consumer prices rose 6.4 percent in June, the fastest pace in three years, as food costs increased.

The preliminary gauge for manufacturing, known as the Flash PMI (Purchasing Managers' Index) hit a 28-month low in July, indicating activity is beginning to contract. The index fell to 48.9 for July from a final reading of 50.1 for June, according to a statement on Thursday. The final July reading is due Aug 1.

The measure is based on 85 percent to 90 percent of responses to a survey of executives at more than 400 companies.

Jiangxi Copper fell 2.8 percent to 35.74 yuan ($5.53). Tongling Nonferrous Metals Group Co dropped 2.7 percent to 25.84 yuan. Yunnan Copper Industry Co, the fourth-largest producer of the metal, slid 2.3 percent to 22.06 yuan.

Copper futures for September delivery fell 0.7 percent to $4.436 a pound in New York on Wednesday, the biggest decline since July 11. The price touched $4.496 a day earlier, the highest since April 11.

Poly Real Estate, China's second-largest developer by market capitalization, dropped 2.3 percent to 10.84 yuan. China Vanke Co, the biggest, lost 0.8 percent to 8.40 yuan. Gemdale Corp slid 1.3 percent to 6.28 yuan.

Bloomberg News

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