China stocks dip as tighter monetary policies in sight

SHANGHAI, Dec 6, 2007 -- stocks fell marginally today as jittery investors stayed cautious after the central government said it will shift monetary policies "from prudent to tight" next year to prevent the economy from overheating and contain accelerating inflation.

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, fell for the first time this month. It dipped 0.15 percent, or 7.58 points, to close at 5,035.07 at 3pm today.

Gainers in the Shanghai market outnumbered losers 452 to 313 while 81 were unchanged.

But the Shenzhen Composite Index, which covers the smaller mainland stock market, recovered early session's loss and gained 0.07 percent, or 0.87 points, to 1,297.59.

The Shanghai index lost 18.19 percent last month, the biggest monthly drop in terms of percentage points since July 1994.

Industrial & Commercial Bank of China Ltd, the nation's biggest listed lender, lost 0.60 percent, or 0.05 yuan (1 US cent), to 8.34 yuan while China Construction Bank Corp, the country's second-largest bank, declined 1.43 percent, or 0.15 yuan, to close at 10.36 yuan.

Poly Real Estate Group Co, China's second-largest developer by market value, shed 2.68 percent, or 1.97 yuan, to 71.44 yuan.

China plans to shift to a "tight'' monetary policy next year to prevent the economy from overheating and curb inflation, according to the Central Economic Work Conference that ended yesterday. It is held annually in December to set economic policies and targets for the following year.

Meanwhile, the yuan dropped as the US dollar rallied. It was the biggest drop the yuan since a peg to the US currency was scrapped in July 2005.

The currency fell 0.34 percent to 7.4128 per dollar as of 2:27pm in Shanghai from 7.3880 yesterday, according to the China Foreign Exchange Trade System. It declined as much as 0.38 percent.

Steel makers led the decline among industrial stocks today, dashing investors' hopes for domestic steel makers controlling the upstream raw material resources.

Baoshan Iron & Steel Co, China's biggest steel maker, lost 0.36 percent, or 0.06 yuan, to 16.50 yuan while Angang Steel Co, China's third-largest steel maker by output, buckled 1.22 percent, or 0.35 yuan, to 28.45 yuan.

Steel mill stocks gained over the past two days as an official from Shougang Corp, the country's ninth largest makers, on Tuesday said Chinese steel makers and the government are mulling a plan to bid for mining firm Rio Tinto Group.

China Petroleum & Chemical Corp, also known as Sinopec, Asia's biggest oil refiner, climbed 0.23 percent, or 0.05 yuan, to 22.27 yuan. PetroChina Co, the nation's biggest oil company, slipped 1.02 percent, or 0.32 yuan, to 31.12 yuan.

The two companies will supply about one million metric tons of crude to private small refineries to help boost fuel output, according to Bloomberg News.

China is compensating oil refineries for the cost of processing crude oil and waiving taxes on fuel imports to help increase diesel and gasoline supplies, the National Development and Reform Commission, the country's top economic planning body, said in a statement yesterday.

Xishan Coal, a coal miner in the north province of Shanxi, gained 2.76 percent, or 1.61 yuan, to 60.01 yuan. Datong Coal Industry

Co, China's second-largest coal producer, jumped 1.45 percent, or 0.41 yuan, to close at 28.72 yuan.

China Shenhua Energy Co, the nation's largest coal producer, erased gains and ended lower by 0.08 percent, or 0.05 yuan, to close at 65.70 yuan.

Prices tendered for coal supplied to power producers rose between 30 yuan and 40 yuan a metric ton, about 10 percent more than this year's, in the price offer submitted by the country's biggest coal producers, the Shanghai Securities News reported today.