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China's Stocks Fall for Fourth Day, Led by Shippers, Airlines; Banks Gain

China’s stocks declined for a fourth day, sending the benchmark index to its longest losing streak in two months, on concern a stronger yuan and flooding in the southern region will slow economic growth.

Air China Ltd., the largest international carrier, dropped 4.5 percent and China Shipping Container Lines Co. fell 1.6 percent on concern about the outlook for transport demand. China Shenhua Energy Co. lost 1.5 percent as the government asked coal producers to keep prices stable. China Merchants Bank Co. paced gains among lenders on speculation Agricultural Bank of China Ltd.’s initial public offering will be smaller than estimated.

“There is uncertainty over economic growth this year as domestic and overseas demand may be hurt by tightening measures and exchange-rate policies,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “I am cautious about the outlook for the stock market.”

The Shanghai Composite Index, which tracks the bigger of the stock exchanges, slipped 17.54, or 0.7 percent, to 2,535.28 at the close, the longest losing streak since the six days ended April 29. The CSI 300 Index lost 0.7 percent to 2,716.78.

The Shanghai gauge gained 1.6 percent last week after the central bank said it will increase the flexibility of the nation’s exchange rate. It has dropped 18 percent in the second quarter, adding to a 23 percent decline this year, on concern government measures to rein in housing prices and the European debt crisis will damp economic growth.

President Hu Jintao called on Group of 20 leaders meeting to coordinate policies to prevent the global economic recovery from stalling. Countries should proceed with caution as they exit from economic stimulus measures and seek sustainable fiscal and monetary policies, Hu said.

‘Very Serious’

A draft of the final statement provided to reporters said the global recovery, which has been faster than expected, remains fragile and uneven.

“The deeper impact of the global financial crisis has yet to be overcome, and systemic and structural risks remain very serious,” Hu said in prepared remarks at a G-20 summit in Toronto yesterday.

Air China dropped 4.5 percent to 11.11 yuan. China Southern Airlines Co., the biggest carrier by fleet size, lost 3.6 percent to 6.80 yuan. China Shipping Container, the second- largest carrier of sea-cargo boxes, fell 1.6 percent to 3.64 yuan.

President Barack Obama said the U.S. expects China’s currency to appreciate as the Chinese government allows more flexibility and market forces take a bigger role in setting the value. China’s decision to lift a two-year-old policy of pegging the yuan to the U.S. dollar and allow its currency to trade more freely was a first step and the U.S. will monitor progress over the next “several months,” he said.

Export Concern

China’s pledge for a more flexible yuan will slow the nation’s exports this year, adding to difficulties that include the European debt crisis and rising costs, a Chinese official with the Ministry of Commerce said.

“I’m not optimistic about the exports this year,” Yu Jianhua, a Ministry of Commerce director general, told reporters at the Group of 20 meetings in Toronto over the week-end. “It’s essential for exporters to cut costs and keep their share in the world trade market.”

The yuan gained 0.5 percent last week, the most since December 2008. China indicated on June 19 that it was scrapping the yuan’s peg to the dollar.

“External demand is still fragile and a stronger yuan may slow exports in the second half,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai.

Profit Estimates

Shenyin & Wanguo Securities Co., voted China’s most influential research unit by New Fortune magazine last year, cut its profit growth forecast for domestically listed companies for 2010 to 24.3 percent from 25.1 percent and for next year to 17 percent from 20.4 percent, according to a report today.

At least 381 people have died in floods in southern China this year and 143 others are missing, the Ministry of Water Resources said yesterday, as the Jiujiang River flooded the most in seven years.

Floods have caused an estimated economic loss of about 83.8 billion yuan ($12.3 billion) in 2010 and have displaced 4.66 million people, the ministry said on its website, citing the Office of State Flood Control and Drought Relief Headquarters.

Shenhua dropped 1.5 percent to 23.15 yuan. China Coal Energy Co., the nation’s second-largest coal producer, slid 1.6 percent to 9.06 yuan. Datong Coal Industry Co., the third- biggest, slumped 6.1 percent to 30.87 yuan.

China’s coal companies have been ordered to keep prices of the fuel stable as the country faces the “heavy” task of managing inflation expectations, the National Development and Reform Commission said in a statement on June 25 after the market closed. The companies must not amend prices agreed on in their annual supply contracts, the top economic planner said.

Agricultural Bank Pricing

Agricultural Bank of China set a price range for the Shanghai part of its initial public offering that will allow it to raise as much as $20.1 billion, according to three people with knowledge of the matter.

“If IPO shares of the Agricultural Bank of China are priced below 3 yuan, that will be positive for the stock market as it raises less money than expected,” said Wang at Jingxi Investment Management. “It will ease investors’ concerns about frequent fundraising.”

Merchants Bank gained 1 percent to 13.52 yuan. China Citic Bank Corp., the banking unit of the nation’s largest investment company, added 2.3 percent to 5.82 yuan.

Taiwan is scheduled to sign its first trade treaty with China tomorrow, strengthening commercial ties with the fastest growing major economy and the island’s biggest trading partner and investment destination.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

Citic Securities Co. (600030 CH), China’s biggest listed brokerage, dropped 2.7 percent to 12.83 yuan. The brokerage said it plans to sell a 51 percent stake in its wholly owned unit China Asset Management Co.

Chongyi Zhangyuan Tungsten Industry Co. (002378 CH) dropped 3.5 percent to 27.89 yuan, the lowest since May 20, after the company said 8.6 million shares will become tradable on July 1.

--Zhang Shidong. Editor: Allen Wan

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-7014 or szhang5@bloomberg.net

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