China Stocks Decline for Fourth Day; Air China, Citic Retreat

By Zhang Shidong and Chua Kong Ho

Aug. 12 (Bloomberg) -- China's stocks, the world's worst performers this year, fell for a fourth day as airlines, stockbrokers and commodities producers retreated on concern faltering growth will hurt profit.

Air China Ltd., the nation's largest international carrier, extended its four-day plunge to 28 percent on speculation the yuan will weaken and boost the cost of paying overseas debt. Citic Securities Co. tumbled on concern a 54 percent slide in stock values will further crimp trading. Zhongjin Gold Corp. and Jiangxi Copper Co. dropped along with prices of the metals.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, fell 12.66, or 0.5 percent, to 2,444.16 at the close, the lowest since Feb. 9, 2007. Equities fell, reversing a gain of as much as 0.7 percent earlier in the day on lower oil futures and consumer prices that rose less than forecast in China.

``Sentiment has deteriorated to a point where the good news is ignored,'' said Simon Hua, head of research at Bank of Communications Schroder Fund Management Co. in Shanghai, which oversees about $3 billion. ``There are buying opportunities in banks and steelmakers at these levels.''

Angang Steel Co. gained after saying first-half profit rose 25 percent on higher product prices.

The gauge, which surged sevenfold in the two years through 2007, became the worst performer among the world's 88 major benchmark indexes this year on concern rising fuel prices and central bank measures to curb inflation will hurt earnings. Inflation cooled for a third month to 6.3 percent in July, the statistics bureau said today.

Airlines Tumble

Airlines tumbled for a third day on concern the government will halt the yuan's 26-month run of gains against the dollar. Local carriers are hurt by any weakening of the local currency because it inflates the value of their dollar-denominated debt when converted into yuan.

Air China plunged 8.2 percent to 7.18 yuan. China Southern Airlines Co., the nation's biggest carrier by fleet size, slid 3.1 percent to 5.90 yuan. China Eastern Airlines Corp., the nation's third-largest, retreated 6.2 percent to 5.79 yuan.

The yuan dropped 0.1 percent to 6.8639 a dollar as of 3:14 p.m. in Shanghai. The local currency has declined 0.7 percent since China's Politburo, the Communist Party's top decision- making body, said on July 25 that maintaining economic growth is as important as controlling inflation.

China Southern made a full-year currency gain of 2.83 billion yuan ($412 million) in 2007. That was more than its 1.87 billion yuan net income. Air China made a gain of 2.03 billion yuan from the appreciation of the yuan last year.

Olympic Games

Airlines also fell on concern the Olympic Games will damp traffic. China has tightened visa regulations and curbed regular Beijing flights to boost security and ease congestion during the games.

Citic Securities, the brokerage unit of China's biggest investment company, dropped 8 percent to 17.99 yuan. Haitong Securities Co., the country's largest listed brokerage by market value, plunged by the 10 percent daily cap to 17.43 yuan.

Shares worth 61.8 billion yuan were traded on the Shanghai and Shenzhen stock markets yesterday, according to data compiled by Bloomberg. That compared with an average daily trading value of 101 billion yuan in July.

Zhongjin Gold, the country's second-largest gold producer, slumped 6.5 percent to 34.55 yuan. Jiangxi Copper Co., China's second-biggest producer of the metal, lost 2.4 percent to 16.91 yuan.

Gold yesterday dropped 4.2 percent to $828.30, the lowest since Dec. 24. A measure of six metals traded on the London Metal Exchange, including copper and zinc, slid 1 percent yesterday.

Oil Falls

Crude oil fell for a third day on signs that a U.S. economic slump will extend into 2009, paring fuel demand in the world's biggest oil consumer. The contract fell 0.8 percent to $113.56 a barrel in after-hours trading.

Angang Steel, China's second-largest steelmaker by market value, gained 5 percent to 10.29 yuan. Net income was 5.99 billion yuan in the first six months, the company said in a statement yesterday, citing international accounting standards. Rising demand from automakers and shipbuilders boosted steel prices in China.

Baoshan Iron & Steel Co., the country's biggest steelmaker, added 2.6 percent to 7.11 yuan. Wuhan Iron & Steel Co., the third-biggest, rose 5.6 percent to 8.26 yuan.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 0.5 percent to 2,457.20. The Shenzhen Composite Index fell 0.6 percent to 694.30.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net