SHANGHAI shares ended lower this morning as the key stock index closed nearly 2 percent lower after crude oil climbed to a record and manufacturing expanded at the slowest pace in almost three years.
The Shanghai Composite Index lost 1.82 percent, or 49.81 points, to 2,686.29 at 11:30am.
Losers in the Shanghai market outnumbered gainers 628 to 172 while 13 were unchanged.
The index dropped more than 48 percent this year, making it the worst-performing stock market in the world.
The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was down 1.40 percent, or 11.11 points, to 782.02.
China Petroleum & Chemical Corp, or known as Sinopec, the nation's largest refiner, decreased on concern higher crude costs will erode profit.
Sinopec buckled 2.27 percent to 9.92 yuan (US$1.45) while PetroChina, the nation's largest oil producer and the biggest stock by market capitalization, shed 1 percent to 14.79 yuan.
Crude prices rose to a record US$143.67 a barrel in New York yesterday on concern Israel will attack Iran over its nuclear program and disrupt oil supplies. Oil has climbed 47 percent this year and was recently at US$140.62.
Citic Securities Co fell after the parent of the nation's largest insurer cut its stake in the brokerage.
Citic Securities, the country's most profitable brokerage, fell 4.60 percent to 22.82 yuan while Haitong Securities Co, China's largest brokerage by market value, also lost 4.76 percent to 23.79 yuan.
Haitong has fallen 13 percent this year, compared with a 49 percent drop for rival Citic Securities Co.
Citic said in a statement yesterday that China Life has been cutting its holdings, without elaborating.
Haitong's fall came after China Minsheng Banking Corp failed to sell 269 million shares in Haitong at a floor price of 11.68 yuan apiece yesterday as potential bidders were unable to come up with enough cash at two weeks' notice, according to the auctioneer.
Minsheng's inability to sell the Haitong stake at less than half the market price underscores a cloudy outlook for brokerages in the mainland's stock markets.
China's brokerages have lost about half of its market value this year after investors traded fewer shares in a declining stock market. The average daily trading volume almost halved to 5.8 billion shares in June from 11.2 billion shares in December.
Almost half of securities companies' revenue is from trading stocks for clients in China.
In the banking sector, China Merchants, the nation's fifth-largest bank by market value, dropped 5.85 percent to 22.05 yuan after dropping nearly 5 percent yesterday. Industrial & Commercial Bank of China Ltd, the largest lender, declined 2.22 percent to 4.85 yuan, while China Construction Bank Ltd slid 1.52 percent to 5.82 yuan.
Steel makers led manufacturing shares down this morning.
Baoshan Iron & Steel Co, the country's largest steel maker, retreated 4.25 percent to 8.34 yuan. XinJiang Ba Yi Iron & Steel Co dived 9.96 percent to 8.14 yuan.
Manufacturing in China expanded at a slower pace in June, according to a survey of purchasing managers by the China Federation of Logistics and Purchasing today.
China's economic growth may slow to 10.3 percent this year from 11.9 percent in 2007, the China Securities Journal reported today, citing Fan Jianping, chief economist with the State Information Center, a government research institute.
On the positive side, Suning Appliance Co, China's biggest home appliance retailer, edged up after its controlling shareholder extended a share lockup period by two years.
Zhang Jindong, chairman of Suning, will delay trading 293.8 million shares, or a stake of about 20 percent, until August 11, 2010, from August 11, 2008, the company said in a statement to the Shenzhen Stock Exchange yesterday after markets closed.
Shares of Suning, based in the eastern city of Nanjing, edged up 0.97 percent to 41.70 yuan in Shenzhen trading yesterday. The stock has declined 43 percent this year after more than tripling in 2007.