China's Stocks Falls

China's key stock index fell, set for its longest losing streak this year, amid signs investor demand for equities is cooling. China Merchants Bank Co. and China Vanke Co. dropped.

``Investors are being put off by the recent decline in equities, as seen by the slowdown in account openings,'' said Wu Kan, an analyst at Shanghai Securities Consulting Co. in Shanghai. ``There are expectations of less liquidity inflow.''

Fewer than 150,000 accounts were opened on June 28 for investing in mainland shares and mutual funds, compared with the daily average of 271,000 for last month and 440,000 in May, according to the latest data from China Securities Depository & Clearing Corp.

The CSI 300 Index lost 60.89, or 1.6 percent, to 3703.19 as of the 2:14 p.m. local time, dropping for its third consecutive day and erasing gains of as much as 1 percent. It last declined for three days in the period ending Dec. 8.

Merchants Bank, the nation's seventh-largest, fell 1.08 yuan, or 4.4 percent, to 23.50. China Vanke, the country's largest listed real estate developer, slid 0.56 yuan, or 2.9 percent, to 18.56. Citic Securities Co., China's most profitable brokerage, plunged 2.92 yuan, or 5.5 percent, to 50.05.

The benchmark fell 4.2 percent last month, its first monthly decline since July 2006, on speculation the government will introduce tightening measures to cool the economy. The index almost doubled in the first five months of this year.

Premier Wen Jiabao said last month that Chinese monetary policy needs ``moderate tightening.'' China has raised interest rates twice and ordered lenders to set aside more money as reserves five times this year to curb a stock market boom and excessive spending on factories and real estate.

Individuals Lead Trading

Trading by individual investors accounts for about 60 percent of market volume, estimates the Shanghai-based brokerage Guotai Junan Securities Co. In the U.S., individuals account for only 5 percent of trading as institutional investors dominate.

Investors may also divert funds away from stocks after China's lawmakers passed legislation that will allow regulators to either scrap or reduce a 20 percent tax on deposit interest income.

The Standing Committee of the National People's Congress, China's parliament, sanctioned the move, the state-run Xinhua News Agency said after the market closed June 29, without specifying whether the tax will be reduced or removed.

The CSI 300 earlier rose as much as 1 percent as the latest manufacturing data led to speculation tightening measures may be delayed.

Interest Rates

Manufacturing in China expanded at the slowest pace in four months in June amid a government clampdown on polluting and energy-intensive industries, according to a survey of purchasing managers released today. The June Purchasing Managers' Index fell to 54.5 from 55.7 in May.

``The economic data don't point to an immediate increase in interest rates,'' Shanghai Securities' Wu said. ``The central bank will have to wait for more data for last month before they can make a final decision.''

Yangtze Power, operator of the world's biggest hydropower project, rose 0.52 yuan, or 3.4 percent, to 15.64. Baoshan Iron & Steel Co., China's largest steelmaker, gained 0.29 yuan, or 3.6 percent, to 11.29.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, fell 1.7 percent to 3757.06. The Shenzhen Composite Index, which covers the smaller one, lost 1.8 percent to 1059.16.

source:bloomberg.com