China Stocks Drop for Third Week; China Shipping, Huaneng Fall

By Zhang Shidong

Aug. 22 (Bloomberg) -- China's stocks fell for a third week, led by transport and power companies after oil prices jumped, renewing concerns fuel costs will erode earnings.

China Shipping Development Co., the nation's biggest oil carrier, dropped 3.8 percent to the lowest since March 2007. Huaneng Power International Inc., the listed unit of China's largest power group, sank 7.6 percent and Guangdong Electric Power Development Co. slumped by the maximum daily limit.

``Fuel costs are still staying at a very high level and that will put a lot of pressure on corporate margins,'' said Lu Yizhen, who oversees the equivalent of $732 million as chief investment officer at Tianhong Asset Management Co. in Beijing. ``At this stage, there isn't a big possibility of a strong rebound or rally in the market.''

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 39.05, or 1.6 percent, to 2,404.93 at the close. The index dropped 1.7 percent this week as investors stayed away to watch the Olympic Games in Beijing.

The benchmark index has sunk 12 percent since the day the Olympics started. Investors traded a daily average of 57.5 billion yuan ($8.4 billion) on China's two stock markets during the two-week Games, almost half the 101 billion yuan daily average for July.

Speculation

Stocks jumped 7.9 percent on Aug. 20, the most in four months, after a JPMorgan Chase & Co. report said the government may spend as much as 400 billion yuan to boost growth.

Speculation that China's government will use foreign- currency reserves for a stock-market stabilization fund is ``seriously flawed,'' said Merrill Lynch & Co. yesterday.

The CSI 300 is down 55 percent this year, the most among 88 major benchmark indexes tracked by Bloomberg, because of concern measures to cool inflation will damp economic and profit growth.

China Shipping slid to 14.76 yuan, the lowest since April 2, 2007. China Cosco Holdings Co., the country's largest container line, lost 1.7 percent to 14.72 yuan.

Crude oil for October delivery yesterday surged 4.9 percent to $121.18, the biggest increase since June 6 on the New York Mercantile Exchange, as the dollar slumped. The Aug. 20 signing of a missile-shield agreement between the U.S. and Poland also heightened concern Russia may disrupt the flow of oil.

The Reuters/Jeffries CRB Index of 19 commodities soared 3.7 percent, headed for its biggest weekly gain in 33 years.

Guangdong Electric

Guangdong Electric, the biggest operator of power plants in the southern Chinese province bordering Hong Kong, retreated to 5.94 yuan. Huaneng Power fell to 6.24 yuan. China State Shipbuilding dropped to 61.62 yuan.

China State Shipbuilding Co., the publicly traded unit of the country's biggest shipbuilder, dropped 5.5 percent even after it said second-quarter profit surged almost 10-fold as rising demand for vessels allowed it to increase contract prices.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, eased 1.1 percent to 2,405.23. The Shenzhen Composite Index lost 1.8 percent to 676.76.

The following companies were among the most active in China's markets. Stock symbols are in brackets after companies' names.

China International Marine Containers Co. (000039 CH), the world's largest maker of shipping containers, lost 0.18 yuan, or 2 percent, to 8.64, dropping for a second day. The company said first-half profit fell 22 percent to 1.03 billion yuan because of the nation's slowing export growth.

Dongfang Electric Corp. (600875 CH), China's second-biggest maker of power equipment, retreated 0.83 yuan, or 3 percent, to 26.87, the second day of declines. The company said first-half profit tumbled almost two-thirds after factories and assets were destroyed by the country's worst earthquake in 58 years. Net income plunged 63 percent to 452.5 million yuan.

Industrial & Commercial Bank of China Ltd. (601398 CH), the nation's biggest listed lender and also known as ICBC, added 0.07 yuan, or 1.5 percent, to 4.83. ICBC earned a record 64.5 billion yuan in the first half to become the world's most profitable bank as a focus on domestic lending helped it avoid the global credit crisis. Net income rose 57 percent in the period.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net