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Shares fall on tax rebate cut

(Shanghai Daily)
Updated: 2007-06-21 10:03

China's main stock index fell on after the government announced a cut in the export tax rebate on nearly 3,000 items of goods, and textile and aluminum shares led the decline.

Analysts said several newly announced initial share sale plans by overseas-listed firms also added to concern an oversupply situation may occur in the mainland equity market over the coming months.

The benchmarkShanghaiComposite Index, which covers yuan-denominatedA sharesand hard-currencyB shares, which had risen 0.68 percent in morning trade, dropped 2.07 percent to close at 4,181.32.

Hong Kong-listed PetroChina Co said yesterday it plans to sell up to four billion A shares in Shanghai, joining other state giants likeChina Construction Bank. Other big names such asChina Shenhua EnergyCo and China Telecom are expected to follow suit.

"This could soak up excessive liquidity, one key factor that supports the mainland market's bull run," said Ling Xuewen, an analyst at Guangzhou Wanlong Securities Consultancy. "The general sentiment in the market is becoming cautious."

China will slash tax rebates on exports of nearly 3,000 types of products starting July 1 to reduce mounting trade surplus and adjust the export mix, the Ministry of Finance said late Tuesday.

Shares of textile firms, furniture makers and certain chemical producers were among the most severely hit by the new policy, according to Sinolink Securities Co analyst Chen Dong.

Nanjing Textiles Imp/Exp Corp tumbled 5.63 percent to 7.38 yuan (97 US cents),FujianNanfang Textile Co lost 4.11 percent to 7.23 yuan while Huafang Textile Co dived 3.66 percent to 10.8 yuan.

Similarly, aluminum producers and steel mills also sank.

ShandongNanshan Aluminum Co shed 6.85 percent to 22.15 yuan while Baoshan Iron & Steel Co was down 2.19 percent to 11.15 yuan.