China's Stock Benchmark Falls to 15-Month Low; Banks Decline

By Chua Kong Ho

July 1 (Bloomberg) -- China's stocks fell, sending the CSI 300 Index to a 15-month low, after manufacturing expanded at the slowest pace in almost three years and oil traded near a record.

China Merchants Bank Co. led lenders lower on speculation the economy is slowing. China Petroleum & Chemical Corp., the nation's largest refiner, retreated on concern higher crude costs will erode profit. Yunnan Chihong Zinc & Germanium Co., China's fifth-largest zinc producer, declined after first-half profit fell 60 percent.

``Profits are going to be disappointing in the second quarter and we're expecting significant downward earnings revisions,'' said Gabriel Gondard, deputy chief investment officer at Fortune SGAM Fund Management in Shanghai, which oversees about $12 billion.

The CSI 300 Index, which tracks yuan-denominated stocks in Shanghai and Shenzhen, lost 93.47, or 3.4 percent, to 2,698.35 at the close, its lowest close since March 20, 2007. More than eight stocks fell for each that advanced.

The benchmark in June had its worst monthly performance since its introduction in April 2005, extending its slump from its Oct. 16 to 54 percent amid concern government measures to curb inflation will hurt economic growth and corporate profits.



China Merchants, the nation's fifth-largest bank by market value, tumbled by the daily 10 percent limit to 21.08 yuan, the biggest drag on the CSI 300 Index. Shanghai Pudong Development Bank Co., part-owned by Citigroup Inc. slumped 8.5 percent to 20.13 yuan, the lowest since March 28, 2007.

Manufacturing Drops

Manufacturing in China, the world's fastest-growing major economy, expanded at a slower pace in June, according to a survey of purchasing managers by the China Federation of Logistics and Purchasing today.

China's economic growth may slow to 10.3 percent this year from 11.9 percent in 2007, the China Securities Journal reported, citing Fan Jianping, chief economist with the State Information Center, a government research institute.

China Petroleum, or Sinopec as the company is also known, declined 4 percent to 9.74 yuan. PetroChina Co., the country's second-biggest refiner, slid 3.2 percent to 14.47 yuan.

Air China Ltd. sank 4.6 percent to 8.10 yuan, on speculation higher ticket surcharges starting today won't be sufficient to cover rising fuel costs. The Beijing-based carrier lost its position as the world's biggest airline by market value to Singapore Airlines Ltd. after declining 70 percent this year.

Oil Soars

Crude oil rose to a record $143.67 a barrel in New York yesterday on concern Israel will attack Iran over its nuclear program and was recently at $141.02. Oil climbed 38 percent between April and June, the biggest quarterly increase in nine years.

Yunnan Chihong fell 6.3 percent to 14.46 yuan after the zinc producer said first-half profit declined 60 percent from a year earlier, due to falling prices and as it shut plants for maintenance.

The Shanghai Composite Index, which tracks stocks on the larger of the nation's two exchanges, dropped 3.1 percent to 2,651.61, while the Shenzhen Composite Index slid 2.1 percent.

The Shanghai index, which has declined 50 percent this year, has to fall to between 2,500 and 2,600 to be ``attractive,'' said Chen Li, Shanghai-based strategist at Shenyin & Wanguo Securities Co.

The following stocks also rose or fell in China. Stock symbols are in parentheses after company names.

China Merchants Property Development Co. (000024 CH), a Shenzhen-based real-estate developer, fell 6.6 percent to 13.96 yuan. The China Securities Regulatory Commission gave conditional approval for the company's plan to sell new shares, according to its statement to the Shenzhen Stock Exchange today.

Citic Securities Co. (600030 CH), the nation's second- largest brokerage, fell 7.3 percent to 22.17 yuan, the lowest since March 30, 2007. China Life Insurance Group, parent of the nation's largest insurer, cut its stake in Citic Securities to 4.97 percent from 5.32 percent, according to a statement.

Guangzhou Shipyard International Co. (600685 CH), a unit of China's biggest shipbuilder, declined 6.8 percent to 23.54 yuan, after saying it plans to sell stock to existing shareholders to finance the acquisition of Guangzhou Wenchong Shipbuilding Ltd., according to a statement.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net
Last Updated: July 1, 2008 04:03 EDT