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August 20, 2009

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Home » Business » Finance

Index slumps to 2-month low

SHANGHAI'S key stock index retreated yesterday to its lowest point in two months, with the property and non-ferrous metals sectors leading the decline.

The benchmark Shanghai Composite Index tumbled 4.3 percent, or 125.3 points, to close at 2,785.58. Turnover was 122.3 billion yuan (US$17.9 billion) compared to Tuesday's 117.9 billion yuan.

The index has dropped 20 percent since reaching this year's peak on August 4.

"Shares of non-ferrous metals producers had gained earlier this year on anticipation of continual inflation and adequate market liquidity, but it does not reflect the actual pace of economic recovery," GF Securities said in a research note.

"Shares will remain shaky and investors should not be in a rush to enter the market."

The 4 trillion yuan stimulus package announced in November as well as the huge amount of new loans extended in the first half of this year has driven the index higher.

However, domestic banks extended 356 billion yuan of new loans last month, only a quarter of the amount in June, fanning speculation that a lack of liquidity will slow the market's momentum.

Steel and metal producers were among yesterday's losers. Baoshan Iron and Steel Co slid 7.18 percent to 7.11 yuan. Aluminum Corp of China Ltd, the nation's biggest producer of the metal, slid 7.47 percent to 14.49 yuan. Shandong Gold Mining Co lost 4.04 percent to 48.72 yuan. Yunnan Copper Co retreated 8.7 percent to close at 28.76 yuan.

Property developers also dropped yesterday after Shanghai Mayor Han Zheng said on Tuesday that the city will provide another 1,200 hectares of land for new residential projects to cool the city's rapidly rising housing prices. The total residential land supply in the city will reach 1,600 hectares this year, more than doubling last year's 700 hectares, he said.

China Vanke Co, the largest listed property developer, dropped 5.58 percent to 11 yuan. Gemdale Corp slid 8.17 percent to 14.39 yuan. Poly Real Estate Group was down 5.56 percent to 23.76 yuan, and Shanghai Shimao Co tumbled 7.38 percent to 13.56 yuan.

Pharmaceutical companies bucked the down trend and gained after the Ministry of Health on Monday issued a list of 307 essential drugs that will be available at lower prices as the government tries to reduce medical costs.

Guilin Layn Natural Ingredients Corp advanced 3.54 percent to 37.40 yuan. Yunnan Baiyao Group Co jumped 5.36 percent to 39.70 yuan.


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