Stocks decline on profit-growth worries
Updated: 2011-05-28 09:32
By Zhang Shidong (China Daily)
China First Heavy Industries Co dropped 3 percent to 4.91 yuan (76 cents) on Friday. The price is a record low for the heavy-equipment maker. [Photo / China Daily]
SHANGHAI - Stocks on the Chinese mainland fell on Friday, extending the benchmark index's biggest weekly drop in 11 months. The decline came after a report showed profit growth slowed among industrial companies and concern intensified that inflation will accelerate this month.
China First Heavy Industries Co, a maker of equipment used in the mining and energy industries, slumped to a record low. Shanghai Friendship Group Inc led declines for retailers on concern that higher borrowing costs will hurt consumer spending. FAW Car Co, which makes cars in China with Volkswagen AG, lost 1.8 percent after a research center predicted a 10 percent fall in auto sales this year. A gauge of smaller companies dropped for a ninth day out of 10.
"Investors are worried that the tightening is overdone and concerns have widened to a slowdown in earnings and economic growth from just inflation," said Wang Zheng, chief investment officer at Jingxi Investment Management Co in Shanghai, which manages about $120 million. "The market is still trying to find a bottom."
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, dropped for a seventh day, losing 26.58 points, to 2709.95 at the 3 pm close. It slid 5.2 percent this week, the biggest weekly drop since July 2. The CSI 300 Index retreated 0.5 percent to 2963.31 while the CSI Smallcap 500 Index slumped 3.2 percent.
The Shanghai gauge has dropped 3.5 percent this year as the central bank raised the reserve requirement ratio for banks 11 times and boosted interest rates four times since the start of 2010 to cool inflation, which has exceeded the government target every month this year.
It has retreated 11 percent from this year's high set on April 18, a sign to some investors that the market has entered a correction.
Profit at China's industrial companies rose 29.7 percent in the first four months to 1.49 trillion yuan ($230 billion) from a year earlier, the National Bureau of Statistics said on its website. That compared with a 32 percent gain in the first quarter of this year.
China First Heavy dropped 3 percent to 4.91 yuan, its lowest close since its listing in February last year. China Oilfield Services Ltd, the drilling unit of the nation's largest offshore oil producer, lost 4 percent to 18.56 yuan.
FAW Car lost 1.8 percent to 12.61 yuan. Chongqing Changan Automobile Co, the Chinese partner of Ford Motor Co and Mazda Motor Corp, fell 1.8 percent to 8.95 yuan.
China's auto sales may drop 10 percent this year with the end of government stimulus policies and restrictions on car licenses, the China Automotive Technology & Research Center said on Thursday.
A gauge of consumer staples stocks lost 2.2 percent, the most among the CSI 300's 10 industrial groups. Shanghai Friendship, an operator of department stores, fell 3.2 percent to 15.99 yuan.
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