Index retreats at midday on economy warning

BEIJING, May 6 -- Shanghai's key stock market declined this morning as financial shares declined on concern the government will impose more measures to tame inflation and record oil prices will hurt profits.

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, shed 0.47 percent, or 17.61 points, to 3,743.40 at 11:30am.

Losers in the Shanghai market outnumbered gainers 543 to 244 while 10 were unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was down 0.97 percent, or 11.01 points, to 1,118.99.

Financial stocks dropped after Vice Finance Minister Li Yong said yesterday at a meeting in Madrid, Spain, that the economy is at risk of overheating.

Central Bank Governor Zhou Xiaochuan yesterday told reporters in Basel, Switzerland, that policy makers may use interest rates to restrain inflation.

Citic Securities, the nation's largest brokerage, fell 3.07 percent to 38.90 yuan (US$5.56). The stock surged 36 percent between April 23 and yesterday. The government announced a reduction in a tax on stock trading on April 23.

Northeast Securities Co, a brokerage based in Liaoning Province, lost 3.87 percent to 33.05 yuan. Hong Yuan Securities Co, a Beijing-based brokerage, declined 3.81 percent to 27.53 yuan.

In the banking sector, Industrial and Commercial Bank of China, the nation's biggest lender, lost 2.10 percent to 6.52 yuan.

China Merchants Bank Co, the nation's fifth-largest bank by market value, was down 1.95 percent to 34.27 yuan. China Merchants said yesterday it will buy a 50 percent stake in affiliate Cigna & CMC Life Insurance Co.

China's economy is at risk of overheating and policy makers may raise interest rates and do more to soak up the cash flooding the financial system, officials said.

"We will combat demand and prevent rapid economic growth from overheating,'' Li told delegates at the Asian Development Bank's annual meeting in Madrid yesterday.

Zhou said in Basel that "there is a possibility to use interest rates'' to restrain inflation and that policy makers have a range of options.

The warning also affected real estate developers this morning.

China Vanke Property Co, the country's biggest developer, buckled 2.54 percent to 24.52 yuan while Shimao Property, a Shanghai developer, retreated 2.47 percent to 15.37 yuan.

China Vanke said it sold property worth 4.32 billion yuan in April, 74 percent more than a year earlier, it said in a statement to Shenzhen's stock exchange yesterday.

Copper producers fell in the early session after the price of the metal soared to a record in New York yesterday.

Jiangxi Copper Co, the second-biggest smelter of the metal, lost 1.34 percent, to 35.36 yuan. Yunnan Copper Industry Co, the country's third-largest smelter of the metal, declined 1.88 percent, to 28.65 yuan.

Aluminum Corp of China, the nation's biggest producer of the metal plans to invest US$2.16 billion in a copper mine in Peru, Peruvian President Alan Garcia said yesterday at a contract-signing ceremony. But the company's shares shed 2.76 percent to 22.52 yuan this morning.

(Source: Shanghai Daily)