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September 19, 2009

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Key index drops as investors await IPO

SHANGHAI'S key stock index slumped yesterday as investors repositioned themselves ahead of the second-biggest IPO in nine months.

The benchmark Shanghai Composite Index retreated 3.19 percent, or 97.59 points, to 2,962.67. Turnover was 181.5 billion yuan (US$26.6 billion).

The index lost 0.91 percent this week, though it rose 2.36 percent in the first four days.

The Shenzhen Composite Index, which tracks the smaller domestic market, was down 3.29 percent to 1,030.10 points.

Metallurgical Corp of China, which provides engineering and equipment services to the mining industry, will list on the Shanghai market on Monday. It sold 226 million class A shares and raised 18.9 billion yuan.

It's the biggest IPO since China State Construction Engineering Co began trading in July. Regulatory authorities resumed IPOs in June after a long hiatus imposed to shore up the market.

Analysts at Zhongyuan Securities said in a report that some investors may have sold shares yesterday to amass funds to invest in Metallurgical Corp on Monday. The float was oversubscribed.

Steel shares fell yesterday after US Steel Corp, the largest US-based steel maker, filed a petition with the US Commerce Department to impose dumping and anti-subsidy duties of as much as 90 percent on US$400 million of imports of steel pipes from China.

Baoshan Iron & Steel Co Ltd dropped 4.19 percent to 7.08 yuan. Wuhan Iron & Steel Co tumbled 5.77 percent to 8 yuan.

Shanghai Pudong Development Bank retreated 4.84 percent to 20.46 yuan after it said it plans to raise 15 billion yuan in a share sale to replenish its capital. No date or pricing information was given.

Other banks and brokerages also reversed Thursday's gains. Pacific Securities lost 3.70 percent to 15.86 yuan. Haitong Securities decreased 3.22 percent to 14.13 yuan. The Bank of Communications lost 3.93 percent to 8.8 yuan, and the Industrial Bank dropped 4.77 percent to 33.92 yuan.

"The index will fluctuate around 3,000 points because investors are still uncertain about the economic outlook," said Lin Feng, an analyst at Aerospace Securities.


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