Chinese stocks declined for the first time in eight days, led by automakers and commodity producers, as investors speculated the recent rally was overdone and metal prices dropped.
The Shanghai Composite Index dropped 21.38, or 0.7 percent, to 2,924.88 at the close, snapping a seven-day, 10 percent advance that was the longest in four months.
"The market needs a break after so many days of gains," said Larry Wan, Shanghai-based deputy chief investment officer at KBC-Goldstate Fund Management Co. "With the economic data coming tomorrow, some investors chose to lock in profits."
The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, declined 1 percent to 3,162.91.
SAIC Motor Corp, the nation's largest carmaker, slid 4.2 percent after surging 24 percent this month. Anhui Jianghuai Automobile Co fell 3.5 percent to 7.51 yuan, ending a five-day, 21 percent surge. The company said shareholder Halton Investment Pte sold a 1 percent stake between Aug 4 and Sept 9.
Jiangxi Copper Co, the biggest producer of the metal, dropped 1.6 percent, snapping a six-day gain, while Zijin Mining Group Co lost 2.6 percent. Copper futures for December delivery fell 1.1 percent to $2.924 a pound in New York on Wednesday and gold retreated 0.3 percent.
Wuliangye Yibin Co sank 3.2 percent, falling for a second day after saying it's being investigated by the securities regulator.
Stocks rallied this month on signs the government will take steps to support equities after the benchmark index entered a bear market, or a decline of at least 20 percent, on Aug 31.
The gauge is still 16 percent down from this year's Aug 4 peak. Regulators on Sept 4 raised the amount foreign funds can invest in equities, while the banking regulator said it may take years to implement stricter capital requirements for banks, easing speculation that the government would curb lending to prevent asset bubbles.
Bank of China Ltd, which led China's $1.1 trillion lending spree in the first half, said ample liquidity has caused "bubbles" in stocks, commodities and real estate. "The potential risk is that a lot of liquidity goes to the asset market," yesterday.
Shanghai-based developers gained after Shanghai Securities News said final preparations to announce Walt Disney Co's planned theme park have started.
Hang Seng up
Hong Kong shares scaled a 12-month peak yesterday, but closed off its highs, after a recent strong rally triggered a short squeeze in blue-chip counters.
The benchmark Hang Seng Index closed 218.52 points higher at 21,069.56 after a 1 percent drop on Wednesday.
But turnover stayed slim at HK$67.6 billion, slightly higher than Wednesday's HK$62.6 billion.
The main gauge has risen 1,500 points since last Wednesday with its blue-chip constituents valued at 18 times their expected earnings.
"The market is pretty grossly overbought at this point and this opens up the opportunity for profit-taking in the next few sessions. The index should pull back to 20,500 points quite quickly," said Andrew To, sales director at Taifook Securities.
The China Enterprises Index, which represents top locally listed mainland stocks, was up 0.9 percent at 12,216.82.
Shares in Industrial & Commercial Bank of China climbed 2.3 percent to HK$5.91 in Hong Kong after the South China Morning Post reported the Chinese lender was showing the most interest in buying Wing Hang Bank.
(China Daily 09/11/2009 page15)