Stocks on the Chinese mainland fell to the lowest point in six weeks as consumer staples producers slumped on concern demand may weaken and industrial companies posted their first January-February profit decline since 2009.

Kweichow Moutai Co, the biggest producer of baijiu liquor, plunged 6.4 percent after Premier Wen Jiabao pledged to ban the use of public funds to buy "high-end" alcohol.

Air China Ltd led declines for the nation's carriers after Xinhua08.com reported China may increase jet fuel prices. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co, China's biggest rare earths producer, surged 8.3 percent after net income increased.

"Slowing profits are a bad signal for the economy and stocks," said Han Tong, co-founder of Shaun Brothers Investment Management Ltd in Shanghai. "Wen's comments will hurt consumption of Moutai, whose customers are high-end consumers and government officials. That will mean lower profits."

The Shanghai Composite Index slipped 3.4 points, or 0.2 percent, to 2,347.18 at the close, the lowest since Feb 14. The CSI 300 Index lost 0.3 percent to 2,547.14.

Consumer staples

The Shanghai Composite has advanced 6.7 percent this quarter, the biggest three-month gain since the third quarter of 2010, on speculation the government will take measures to boost economic growth.

A gauge of consumer staples stocks in the CSI 300 fell 3.9 percent, the most among 10 industry groups. Kweichow Moutai tumbled 6.4 percent to 201.50 yuan ($31.96), its biggest loss since November 2010. Wuliangye Yibin Co, the second-largest baijiu maker, slid 6.5 percent to 34.50 yuan. Jiangsu Yanghe Brewery Joint-Stock Co lost 5.8 percent to 153 yuan.

Consumption by government officials using public funds has helped push up the prices of products such as China Kweichow Moutai Distillery Co's 106-proof liquor. Wen warned that corruption may endanger the ruling Communist Party's survival as he spoke at a State Council meeting on Monday, according to a statement on the government's website.

Chinese industrial companies had their first January-February profit decline since 2009 as slowing exports and a government campaign to cool property prices damped earnings.

Weak profits

Net income dropped 5.2 percent from a year earlier to 606 billion yuan, the National Bureau of Statistics said on its website on Tuesday. That compared with a 34.3 percent gain in the first two months of 2011.

China's industrial profits will remain weak in the "near term" as economic growth slows, according to Barclays Plc.

Decelerating growth and moderating inflation will pave the way for more policy easing such as a relaxation of loan quotas and two to three more cuts in lenders' reserve-requirement ratios, analysts Jian Chang, Yiping Huang and Lingxiu Yang wrote in a report to clients.

A gauge of industrial companies slid 0.3 percent. Sany Heavy Industry Co, the construction-equipment maker run by China's richest man, lost 0.8 percent to 13.28 yuan.

Bloomberg News in Shanghai

(China Daily 03/28/2012 page16)