Global growth concerns hit energy shares

SHANGHAI - Stocks on the Chinese mainland fell for a second day on Tuesday. The decline came on speculation inflation may have accelerated last month and as oil prices dropped amid concern that slowing global economic growth will curb fuel demand.

PetroChina Co and China Shenhua Energy Co declined as crude oil slid from a 30-month high. Dongfang Electric Corp, a manufacturer of nuclear-power equipment, retreated after Japan raised the severity rating of its nuclear crisis to the highest level. Huaneng Power International Inc surged the most since February 2009 on speculation the country will boost electricity prices. Air China Ltd led a rally among carriers.

"March inflation might still be high," said Zhang Ling, general manager at Shanghai River Fund Management Co. "This will hold back a rebound for stocks." He said consumer prices might have risen to between 5.3 percent and 5.5 percent in March, compared with 4.9 percent in January and February.

The Shanghai Composite Index dropped 0.05 percent to 3021.37 at the 3 pm close. The CSI 300 Index lost 0.20 percent to 3326.77.

Inflation accelerated to 5.2 percent in March, exceeding the government's 2011 target of 4 percent for the third month this year, according to the median estimate in a Bloomberg News survey. Gross domestic product expanded 9.4 percent in the first quarter, the survey showed. The economy grew 9.8 percent in the fourth quarter. The inflation figures are due to be released on Friday.

A gauge of 23 energy stocks slid 1.2 percent, the most among the CSI 300's 10 industry groups. PetroChina dropped 1.07 percent to 12.05 yuan ($1.84), the biggest decline in a month. Shenhua retreated 1.07 percent to 30.54 yuan. Yanzhou Coal Mining Co lost 3.04 percent to 36.04 yuan.

Oil fell for a second day because of concern fuel demand will slow after the International Monetary Fund (IMF) cut its growth forecasts for the US and Japan, saying high crude prices pose a risk to global economic expansion. The contract for May delivery slid as much as 1.9 percent to $107.87 a barrel in after-hours trading in New York on Tuesday.

The US economy will expand 2.8 percent this year, slowing from 2.9 percent last year and less than the 3 percent growth rate for 2011 forecast in January, the IMF said. The fund also cut its estimate of Japan's growth to 1.4 percent from 1.6 percent in the previous forecast after the nation's earthquake and ensuing tsunami.

Huaneng Power jumped 7.21 percent to 6.10 yuan. Shanghai Electric Power Co, supplier of a third of the electricity in the city, surged 10 percent to 4.93 yuan.

"Chinese power stocks are surging as there is speculation the government will raise on-grid electricity prices and the announcement is due within days," said Peter Yao, a power analyst with Bank of China International Holdings Ltd, from Hong Kong.

Air China rose the most since Oct 25 on lower crude prices. The stock climbed 5.25 percent to 11.22 yuan.

Dongfang Electric, which derived 6.5 percent of sales from nuclear-power-related products in 2009, fell 1.57 percent to 27.61 yuan, extending its loss to 21 percent this year. Jiangsu Shentong Valve Co, a manufacturer of nuclear power valves, slumped 4.17 percent to 27.57 yuan.

Bloomberg News

(China Daily 04/13/2011 page16)