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Shanghai stocks drop on concern about capacity glut
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SHANGAHI stocks fell for the first time in four days as material producers declined after the industry ministry said China will accelerate process of reducing industrial capacity in spite of economic downturn.
The key Shanghai Composite Index shed 0.29 percent to 2,100.14 points. Daily turnover was 95.8 billion yuan (US$15.7 billion).
“Latest data signaled resilience in economic growth but investors still have doubts about the strength of recovery,” said Shenyin & Wanguo Securities.
The broker expects a limited bounce of cyclical shares because economic expansion is still subject to liquidity pressure and the government’s priorities to tame rising home prices, to control consumer prices and to beef up environmental protection would also be constraints.
China will step up efforts to cut excessive industrial capacity a year earlier than planned despite a moderate growth in economy, said Miao Wei, Minister of Industry and Information Technology.
China last month ordered more than 1,400 companies in 19 industries to cut outdated production capacity in an effort to restructure the economy.
Non-ferrous metal producers led the decline. Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Co, China's biggest producer of rare earth materials, dropped 1.4 percent to 29.17 yuan. Xiamen Tungsten Co lost 2 percent to 30.99 yuan.
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