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Shares plunge as investors reassess rally

SHANGHAI'S key stock index plunged nearly 5 percent today, the largest single-day retreat since the beginning of this year, amid profit taking after the index had advanced to nearly 2,400 points on Monday.

The Shanghai Composite Index retreated 4.72 percent, or 109.58 points, to 2,209.86 points. Turnover was 135.2 billion yuan (US$19.88 billion). Losers outnumbered gainers 772 to 107 while 29 remained unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic market, lowered 4.06 percent, or 29.95 points, to 707.03 points.

While stocks may have "further room to run" before the announcement of various stimulus programs and the annual session of the National People's Congress next month, the rally may not be sustainable as "we do not believe it is supported by fundamentals," wrote Steven Sun, HSBC strategist, in a note yesterday.

Sun advised investors to sell stocks after the benchmark Shanghai Composite Index rose above 2,300 points.

The Shanghai benchmark has rallied 25 percent this year, the best-performing of 90 global stock gauges. The index closed at 2,319.44 yesterday.

Commodities plunged to their lowest level since June 2002. Crude oil fell as much as 8.2 percent, and copper declined the most in three months. Jiangxi Copper Co, China's biggest producer of the metal, 6.32 percent to 16.91 yuan.

PetroChina Co, the nation's biggest oil company, lost 4.91 percent to 11.24 yuan while China Petroleum & Chemical Corp, Asia's biggest oil refiner, slid 6.02 percent to 8.58 yuan.

Banks also suffered losses. Industrial & Commercial Bank of China, the nation's biggest lender, lost 4.24 percent to 3.84 yuan. Shanghai Pudong Development Bank Co was down 4.39 percent to 16.99 yuan. Bank of Communications slid 5.82 percent to 5.66 yuan. Bank of China retreated 5.20 percent to 3.28 yuan.

Poly Real Estate Group Co, China's second-largest developer by market value said it plans to invest 21.5 billion yuan in property this year after profit jumped 50 percent last year. Separately, Poly said it may raise up to 8 billion yuan from a private placement of shares. Its shares dropped 2.90 percent to 17.77 yuan.

Bucking the downward trend, machinery makers gained with analysts believing construction demand will increase following the Lunar New Year period as companies start working on new projects. Xuzhou Construction Machinery Science & Technology Co Ltd advanced 4.33 percent to 23.15 yuan. Sany Heavy Industry Co, which makes concrete pumps and road rollers, was up 0.66 percent to 22.95 yuan.

Changsha Zoomlion Heavy Industry Science & Technology Development Co, which makes heavy construction equipment, gained 3.65 percent to 18.72 yuan.

Cement producers were also on the gainers' side. Xinjiang Tianshan Cement Co Ltd edged up 0.14 percent to 13.82 yuan. Anhui Conch Cement Co Ltd was up 0.58 percent to 34.70 yuan.


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