Chinese shares fall 1.74 percent in morning trade

Chinese share prices fell 1.74 percent in Tuesday morning trade as heavyweight oil refiners remained under pressure after regulators rejected price hikes of oil products, dealers said.

The National Development and Reform Commission said in a statement on its website Monday that PetroChina and Sinopec will keep prices stable on the domestic market in response to market rumors of an impending price hike.

Meanwhile, PetroChina and Sinopec have also been instructed by the government to ensure adequate supply of key oil products to guarantee domestic price stability.

This requires them to import or buy products from other companies, often at a loss.

"Both of the two companies have suffered losses in their oil refinery business due to surging crude prices," said Zhu Zhiyong, an analyst at Golden Sun Securities.

"But given the present high inflation, government regulators are unlikely to ease control on fuel prices... As the major state oil companies, the two need to take certain responsibilities to help control inflation."

Zhu also noted that a weaker net profit growth for PetroChina in 2007 also discouraged investors and triggered massive sales.

PetroChina, the biggest index component, ended the morning down 4.79 percent at 18.88 yuan, after hitting a new all-time low of 18.74. Sinopec also plunged 4.22 percent at 12.48 yuan.

The benchmark Shanghai Composite Index, which covers both A and B shares, shed 63.11 points to 3,563.08.

The Shanghai A-share Index fell 66.39 points or 1.74 percent to 3,738.44. The Shenzhen A-share index was down 15.33 points or 1.28 percent to 1,178.50.

(Agencies)