CHINA’S A shares fell on downbeat news for the metals sector, with the benchmark Shanghai Composite Index dropping 0.72% to 2,695.72.
However, a near-term interest rate hike is unlikely, analysts said, which should keep the Index at or near 2,700 this week.
Metal firms were big losers on the stock market today after a report in the official media over the weekend said Beijing is pondering a reduction or cancelation in export tax rebates on a broader list of commodities, with specific mention of nonferrous metals made.
Predictably enough, Yunnan Chihong Zinc & Germanium plummeted 8.3% to 26.27 yuan, Tongling Nonferrous Metals Group shed 5.7% to 25.75 yuan and and China’s top finished aluminum producer Chalco lost 1.7% to close at 10.42 yuan.
In mid-2010, economic regulators had begun cancelling export tax rebates on various nonferrous metals, steel products and other key commodities, and analysts cited in local media say the new cancellations will hit earnings at listed metals firms, thus the selloff in their shares today.
Petroleum counters were one bright spot today, with China Oilfield Services Ltd (SHA: 601808 ; HK: 2883) adding 0.89% to 22.72 yuan and China Petroleum & Chemical Corporation (SHA: 600028), better known as Sinopec, jumping by 1.15% to close at 8.80 yuan.
Another drag on the market today came from seasonal liquidity, as many in China have already gone into vacation mode ahead of the upcoming Lunar New Year extended holiday and the desire for cash to stuff red envelopes and pay for travel always hits trading turnover in late January, analysts added.
Looking ahead, most market watchers anticipate the Shanghai Composite Index to hover around the 2,700 market this week due to the short-term liquidity crunch and the unlikelihood of any new near-term interest rate hikes.
In the past three months, China’s central bank has raised its benchmark interest rate twice in an ongoing campaign to stymie growing inflationary pressure in the country, while raising the reserve requirement ration some seven times in the past 12 months.
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