China Stocks Fall for 1st Time in Three Days; PetroChina Gains

By Chua Kong Ho

Sept. 23 (Bloomberg) -- China stocks fell, snapping a two- day rebound by the CSI 300 Index, as a central bank report showed that planned house purchases are the weakest on record and after export orders fell to the lowest since 2005.

China Vanke Co., the nation's largest publicly traded developer, sank 7.6 percent after the proportion of households planning to buy a home dropped to the lowest since the central bank survey began in 1999. Inner Mongolia Yili Industrial Group Co., which sold contaminated milk products, plunged by the 10 percent limit as Goldman, Sachs & Co. advised selling the stock.

``We remain cautious as there are still many uncertainties in the economy,'' said Zhang Xuedong, a portfolio manager at Lord Abbett China in Shanghai, which oversees about $730 million in assets and doesn't disclose investment plans.

The CSI 300 Index, which tracks yuan-denominated A shares in Shanghai and Shenzhen, fell 84.14, or 3.8 percent, to 2,123.48 at the close, halting a two-day, 16 percent advance. Nine of the 10 industry groups declined, with 255 of the 300 stocks on the index retreating.

PetroChina Co., the nation's largest oil company, climbed 3.9 percent to 12.61 yuan, after its parent bought 60 million of the Shanghai-listed shares and oil in New York surged as much as 24 percent yesterday to $130 a barrel before the expiry of the October contract. November futures advanced 6.4 percent to $109.37 a barrel, and were recently at $108.60 in after-hours trading.

Bear Market Rally?

The CSI 300 rose to a two-week high yesterday after the securities regulator said it may make it easier for companies to buy back shares and the U.S. government proposed a $700 billion debt rescue plan. The measure has declined 60 percent this year, the world's second-worst performer, as a slowing economy eroded profits and concerns over a supply of new shares weighed on sentiment.

An index for export orders slumped to the lowest since July 2005, when the nation revalued its currency, according to the central bank's survey of businesses. Only 8.2 percent of respondents said stocks were a good investment, while a record proportion favored bank deposits.

Vanke declined 7.6 percent to 5.50 yuan. Poly Real Estate Group Co., the second-biggest Chinese developer by market value, fell 5.3 percent to 13.28 yuan. Gemdale Corp., based in Shenzhen, dropped 10 percent to 5.39 yuan.

Yili Industrial sank 10 percent to 9.93 yuan. Bright Dairy & Food Co., which also sold contaminated milk, also fell by the daily limit to 4.03 yuan.

Tainted Milk

Tainted milk has sickened almost 53,000 children, triggered the resignation of China's chief quality supervisor and caused countries from Asia to Africa to curb sales of Chinese dairy products. Premier Wen Jiabao ordered an overhaul of the industry after products of 22 companies were found to contain melamine.

``We believe the incident will lower domestic milk demand in the near term with rising concerns on food safety and that it may take 6-12 months before demand recovers,'' wrote Beijing- based analysts led by Yifan Deng at Goldman's China joint venture brokerage Beijing Gao Hua Securities Co. today.

Beijing Sanyuan Foods Co., whose products have been cleared in the nationwide probe into tainted milk, surged 10 percent to 4.62, extending a five-day, 52 percent advance.

The Shanghai Composite Index slid 1.6 percent to 2,201.51, while the Shenzhen Composite Index fell 5.5 percent to 584.26.

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

Gold producers: Shandong Gold Mining Co. (600547 CH), China's third-largest bullion producer, climbed 3.38 yuan, or 10 percent, to 37.14 yuan, rising by the daily limit for a third- straight day. Zhongjin Gold Corp. (600489 CH), based in Beijing, jumped 3.2 yuan, or 10 percent, to 35.17.

Gold climbed as much as 1.4 percent to $909.64 an ounce today as investors sought the precious metal as a haven from financial market turmoil.

Airlines: China Southern Airlines Co. (600029 CH), the nation's largest airline, fell 0.20 yuan, or 5.3 percent, to 3.58. Air China Ltd. (601111 CH), based in Beijing, slid 0.26 yuan, or 4.4 percent, to 5.59. China Eastern Airlines Corp. (600115 CH), based in Shanghai, sank 0.34 yuan, or 7.7 percent, to 4.10.

Jet fuel rose 2.9 percent, the biggest gain in more than two weeks, to $120.55 a barrel in Singapore yesterday. Jet fuel is the single-biggest expense for Chinese carriers.

Ping An Insurance (Group) Co. (601318 CH), the second- biggest Chinese insurer, declined 1.49 yuan, or 4 percent, to 35.61, after gaining 10 percent for two consecutive trading sessions. Goldman Sachs reduced its price estimate by 18 percent to 52.2 yuan.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net