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Shanghai stocks drop 1.15% in morning session

SHANGHAI'S key stock index fell in the morning session as measures to bolster key sectors fell short of expectations.

The Shanghai Composite Index lost 1.15 percent, or 22.2 points, to 1906.66 points.

The Shenzhen Composite Index, which tracks the smaller domestic market, was down 0.55 percent, or 3.28 points, to 590.74 points.

The State Council said yesterday the government will cut the sales tax on vehicles with engines smaller than 1.6 liters to 5 percent between January 20 and December 31.

SAIC Motor Co, China's largest car maker, dropped 2.3 percent to 5.94 yuan. FAW Car Co slid 3.94 percent to 8.29 yuan.

Rising competition among auto makers will force them to lower prices, further squeezing profit margins, said Cheng Xiaodong, head of the vehicle-price monitoring arm of the National Development and Reform Commission.

The government also said it will offer subsidies to steel producers to shore up the industry and ban the expansion of steel-making capacity.

Baoshan Iron & Steel Co, China's biggest steel maker, declined 1.17 percent, to 5.07 yuan.

The country's two largest oil refiners were also on the losing side after China cut fuel prices for the second time in a month in line with drops in global oil prices.

The gasoline price will be reduced by 140 yuan (US$20.50) a metric ton, or 2 percent, and diesel by 160 yuan a ton, or 3.2 percent, starting today, according to a statement by the National Development and Reform Commission.

PetroChina Co shed 1.56 percent to 10.08 yuan while China Petroleum & Chemical Corp edged down 0.97 percent to 7.17 yuan.

China Southern Airlines Co, the nation's biggest carrier by fleet size, declined 1.49 percent to 3.31 yuan after saying it expects to post a full-year loss for 2008 as the global financial crisis hurt demand for air travel in the second half and oil prices soared to records in the first half of the year.

Bucking the downward trend, China Unicom led the telecommunications sector up as it expects its third-generation mobile-phone operation to be profitable in 2010 after starting the service in the first half of this year.

China United Telecommunications Corp surged 3 percent to 4.8 yuan. ZTE Corp, China's second-biggest maker of phone-network equipment, advanced 2.81 percent to 27.43 yuan.

China Coal Energy Co, the nation's second-largest coal producer by sales, said it posted an 11 percent increase in output last year to meet higher demand. Its shares gained 0.31 percent to 12.96 yuan.

Haitong Securities Co, the country's second-largest listed brokerage by market value, jumped 2.04 percent to 10.02 yuan despite saying 2008 profit fell 39 percent to 3.3 billion yuan.


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