2010-12-17 10:18

SHANGHAI - China's stocks fell for a second day, led by banks and metal producers, on concern the government's efforts to tame inflation by slowing lending and raising inflation rates will reduce earnings.

China Construction Bank Corp and Bank of China Ltd paced losses for lenders after the Oriental Morning Post reported regulators in Shanghai ordered halts on lending to companies for purchases of fixed assets. Jiangxi Copper Co slid 2.5 percent as metal prices slumped.

"There's uncertainty as further monetary policy changes depend on the new-loan target for next year," said Wan Dingshan, fund manager at Bosera Asset Management Co, which oversees the equivalent of $29 billion. "It's more likely we will see another interest-rate hike next year as pressure from inflation may remain at a very high level."

The Shanghai Composite Index lost 0.46 percent to 2898.14 at the 3 pm close on Thursday. The CSI 300 Index declined 0.52 percent to 3230.67.

The Shanghai Composite has dropped 12 percent this year, the worst performer in Asia. The index has fallen 8.3 percent since rallying to an almost seven-month high on Nov 8, after the Chinese government boosted interest rates in October and raised bank reserve requirements twice in November and once again last week.

A gauge of financial stocks in the CSI 300 fell for a third day, losing 0.9 percent. Bank of China slid 0.61 percent to 3.28 yuan (49 cents) on Thursday. China Construction Bank lost 0.63 percent to 4.74 yuan.

The China Banking Regulatory Commission's Shanghai branch ordered halts on lending to companies for the purchases of fixed assets until the end of the year, the Oriental Morning Post said.

A gauge of material producers retreated 1.1 percent, the most among the CSI 300's 10 industry groups, on concern tightening policies will curb demand. Jiangxi Copper lost 2.52 percent to 39.83 yuan on Thursday, while Yunnan Copper Industry Co dropped 2.12 percent to 24.91 yuan.

Copper declined for a third day as stockpiles expanded and renewed concern that Europe's debt crisis may hamper the global economic recovery hurt the outlook for demand.

Kweichow Moutai led gains for consumer staples companies, surging 3.13 percent to 206.98 yuan on Thursday. Wuliangye Yibin Co increased 1.61 percent to 38.60 yuan.

Kweichow Moutai will increase prices by 20 percent on average starting Jan 1 because of increased costs of raw materials and demand, the company said in an exchange filing on Wednesday.

Zhejiang Hangxiao Steel Structure Co rose by the 10 percent daily maximum limit for a second day in Shanghai after saying it received orders of $213 million from three Indian power generators.

Bloomberg News