Bloomberg News

Chinese Stocks Fall; Baoshan Steel Drops on Oversupply Concerns

November 01, 2005

Chinese stocks declined after a report the nation's steel companies will be forced to cut production to head off declining prices of the metal. Baoshan Iron & Steel Co. led steelmakers lower.

``The problem of oversupply will continue to take its toll on steelmakers' shares,'' said Yan Ji, who helps manage the equivalent of $720 million at First Trust Fund Management Co. in Shanghai.

Liaohe Jinma Oilfield Co., Jilin Chemical Industrial Co. and Jinzhou Petrochemical Co. surged after PetroChina Co. offered to buy the shares it doesn't already own in the three units.

The Shanghai Composite Index, which covers yuan-denominated A shares and foreign-currency B shares, dropped 2.87, or 0.3 percent, to 1089.95 at the 3 p.m. local time close. The Shenzhen Composite Index, which tracks the smaller market, lost 0.69, or 0.3 percent, to 264.71.

Baoshan Steel, the listed unit of China's biggest steelmaker, dropped 0.06 yuan, or 1.5 percent, to 3.90. Separately, the Shanghai stock exchange said it has started a probe into trading of the steelmaker's warrants, which jumped 47 percent yesterday.

The exchange closely monitored accounts suspected of rigging prices of the warrants during yesterday's trading, according to the Shanghai bourse. It also issued notes requiring related brokerages cooperate on the probe. The warrants slumped 14 percent to 0.965 yuan today.

Export Surge

Maanshan Iron & Steel (600808) Co., China's largest Hong Kong-listed steelmaker by value, lost 0.04 yuan, or 1.5 percent, to 2.67. Handan Iron & Steel Co. retreated 0.04 yuan, or 1.4 percent, to 2.80.

The China Iron and Steel Association's more than 100 members agreed to cut output of steel products to boost prices, particularly of medium and thick steel plates and hot-rolled sheets, a China Daily report cited Qi Xiangdong, deputy director- general of the industry group, as saying.

Liaohe Jinma Oilfield, an oil producer based in the northeast province of Liaoning, surged 0.74 yuan, or by the 10 percent daily limit, to 8.15, the highest since Nov. 11, 2004.

Jilin Chemical, a petrochemical unit of PetroChina, gained 0.21 yuan, or 4.3 percent, to 5.12. Jinzhou Petrochemical jumped 0.34 yuan, or 8.8 percent, to 4.20.

PetroChina, China's biggest oil producer, on Oct. 31 said will buy the shares it doesn't already own in the units to simplify its structure and increase efficiency.

To contact the reporter on this story: Zhang Shidong in Shanghai at at szhang5@bloomberg.net

To contact the editor responsible for this story: Ben Richardson in Hong Kong at brichardson8@bloomberg.net


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