China's Stocks Decline for a Second Day; ICBC, Yanzhou Slide

By Zhang Shidong

Sept. 24 (Bloomberg) -- China's stocks fell for a second day, led by financial and energy companies, on concern global economic growth will slow and U.S. lawmakers may hold up a $700 billion bailout of financial companies.

Additional stock purchases by China's sovereign wealth fund failed to prevent a 4.1 percent drop in Industrial & Commercial Bank of China Ltd., the nation's biggest listed lender. Yanzhou Coal Mining Co., the listed unit of China's fourth-biggest coal miner, lost 4 percent.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, declined 36.30, or 1.7 percent, to 2,087.18 as of 1:32 p.m. local time, extending yesterday's 3.8 percent decline. The measure pared a 16 percent gain over the two days ending Sept. 22, when equities rose on government plans to increase its stakes in the biggest banks and to make it easier for companies to buy back shares.

``Investors are still a bit worried about the global and domestic economic fundamentals, which are still in a downtrend,'' said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management Co. in Beijing. ``Some are selling shares to lock in profits after the upsurge.''

Federal Reserve Chairman Ben S. Bernanke said in testimony before Congress yesterday that the government should buy devalued assets at above-market values. Some lawmakers expressed reluctance to sponsor the bailout package, saying it appears to aid financial companies at the expense of taxpayers.

ICBC

Industrial & Commercial Bank, also known as ICBC, fell 4.1 percent to 4.17 yuan. China Construction Bank Corp., the country's second-largest bank, dropped 4.1 percent to 4.47 yuan. Bank of China Ltd., the third-largest, declined 2.7 percent to 3.58 yuan.

Chinese banks have a combined $721 million at risk tied to Lehman Brothers Holdings Inc., which filed the biggest bankruptcy in history on Sept. 15, according to statements by the Chinese banks.

Central Huijin Investment Co. yesterday bought 2 million Shanghai-traded shares each in ICBC, Construction Bank and Bank of China, according to separate statements from the banks. Central Huijin, a unit of China Investment Corp., which is in charge of the nation's $200 billion sovereign wealth fund, will continue to buy shares in the three banks over the next 12 months, the statements said.

Central Huijin is the controlling shareholder in the three banks after spending $60 billion bailing them out between 2003 and 2005.

China Coal

Yanzhou Coal lost 4 percent to 11.87 yuan. China Coal Energy Co., the listed unit of the country's second-largest producer of the fuel, fell 2.9 percent to 10.90 yuan. The stock dropped even after parent China National Coal Group bought 4.05 million shares in the unit, taking its stake to 57.55 percent from 57.52 percent.

Crude oil for November delivery sank 2.5 percent to $106.61 a barrel in New York yesterday after touching $104.05 a barrel. It was the fourth day this month that prices have declined more than $5 a barrel.

Inner Mongolia Yili Industrial Group Co., China's biggest dairy producer by sales, slid 5.8 percent to 9.35 yuan, extending yesterday's maximum 10 percent drop.

Dairy Recall

China pulled more than 7,000 metric tons of tainted dairy products from retail-store shelves, the Xinhua News Agency reported, citing the State Administration of Industry and Commerce. Almost 53,000 babies became ill, and at least four have died, after consuming milk powder tainted with melamine, according to government statistics. Twenty-two dairy companies including Yili sold products containing the chemical, according to the government.

Kweichow Moutai Co. rose after denying reports that its drinks contain sodium nitrate. Moutai, maker of the fiery liquor used at official banquets, gained 2 percent to 122.71 yuan.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, lost 2.3 percent to 2,151.75. The Shenzhen Composite Index dropped 1.1 percent to 577.77.

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