China’s Stocks Fall for First Time in Four Days on Europe Crisis

China’s stocks fell for the first time in four days on concern the nation’s inflation rate will jump this month and the European debt crisis will curb demand for commodities and slow economic growth.

PetroChina Co., the nation’s biggest oil producer, dropped to the lowest in almost a month as Brent crude prices declined. Jiangxi Copper Co. led a retreat for raw material companies. Beijing Tongrentang Co., a retailer of Chinese medicine, climbed 6.9 percent and Tsingtao Brewery Co., the second-biggest brewery, surged to an eight-month high as investors sought companies whose profit may withstand an economic slowdown.

“I am more willing to invest in defensive stocks since the outlook for inflation and economic growth is still unclear,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slipped 3.48 points, or 0.1 percent, to 2,816.69 at the 3 p.m. close. Of the 947 stocks in the measure, 448 stocks fell, 438 rose and 61 were unchanged. The CSI 300 Index (SHSZ300) lost 0.2 percent to 3,122.60.

The Shanghai gauge had climbed for a fourth week after government reports showed China’s economy grew at a faster-than- expected 9.5 percent in the second quarter and industrial production expanded more than estimated in June. The measure has added 0.3 percent this year, erasing a loss of as much as 6.7 percent, on expectations the central bank will halt monetary tightening after raising interest rates five times and the reserve-requirement ratio 12 times since the start of 2010.

Commodities Slump

Gauges of material and energy stocks in the CSI 300 dropped 0.7 percent and 0.6 percent respectively, the most among 10 industry groups.

PetroChina lost 0.7 percent to 10.69 yuan, its lowest close since June 22. Jiangxi Copper, China’s biggest producer of the metal, retreated 1.1 percent to 36.61 yuan. Zhuzhou Smelter Group Co., the nation’s biggest producer of refined zinc, fell 1.3 percent to 18.18 yuan.

European Central Bank President Jean-Claude Trichet repeated his opposition to any restructuring of Greek debt. Brent crude dropped as much as 0.4 percent before euro-area leaders meet in Brussels on July 21 to discuss the “financial stability” of the region.

China’s consumer prices may increase by about 6.5 percent in July, Reuters reported, citing Chen Dongqi, deputy head of the National Development and Reform Commission’s macroeconomic research institute. The inflation rate was 6.4 percent in June, a three-year high.

The nation’s benchmark money-market rate climbed on speculation the central bank will sell more bills to drain cash from the financial system and contain inflation.

Industrial & Commercial Bank of China Ltd., the nation’s largest lender, slumped 0.9 percent to 4.36 yuan. Industrial Bank Co., part-owned by a unit of HSBC Holdings Plc, lost 1.3 percent to 14.07 yuan. China Minsheng Banking Corp., the first privately owned bank, dropped 0.9 percent to 5.74 yuan.

Home Prices

China’s new home prices rose in 67 Chinese cities in June, with growth in Beijing and Shanghai accelerating. In Beijing new home prices rose 2.2 percent last month from 2.1 percent in May, while in Shanghai they climbed 2.2 percent, compared with 1.4 percent growth the previous month, the statistics bureau said on its website today.

China’s fixed-asset investment growth will likely slow as infrastructure projects under the stimulus program wind down, local financing vehicles face tightening and government curbs depress property investment, Ba Shusong, a researcher at the State Council’s Development Research Center, wrote in a commentary published in Economic Information Daily today.

Monetary tightening may also affect investment growth, Ba said. A risk of overtightening may occur if investment in affordable housing in the fourth quarter doesn’t offset the decline in other property investment, Ba wrote.

Cement Makers

Anhui Conch, China’s biggest cement maker, retreated 2.6 percent to 27.98 yuan, paring its gain to 41 percent this year. The stock had surged on speculation it will benefit from the government’s plan to speed up construction of affordable housing. Huaxin Cement Co., the Chinese affiliate of Holcim Ltd., fell 1.7 percent to 28.50 yuan. Tangshan Jidong Cement Co. slid 3.6 percent to 24.87 yuan.

A measure tracking 23 consumer staples stocks rose 1 percent today, the most among the CSI 300 groups. Tsingtao Brewery added 1.2 percent to 37.19 yuan, the highest close since Nov. 10. Kweichow Moutai Co., China’s biggest producer of baijiu liquor by market value, gained 2 percent to 198.96.

Shanghai Bailian Group Co., the listed unit of China’s biggest retailer, rose 2.6 percent to 16.59 yuan. First-half profit may have increased more than 50 percent as the company booked an investment gain of 308.9 million yuan ($47.8 million) from the sale of a stake in its property unit.

A gauge of 21 health-care stocks rose, extending a 3.6 percent jump on July 15 after the Shanghai Securities News said the government may announce a biomedical development plan by the end of the month. It has gained 9.7 percent this month, the most among the CSI 300 industry groups.

Beijing Tongrentang climbed 6.9 percent to 19.56 yuan, extending a 10 percent jump in the previous session. Zhejiang Hisun Pharmaceutical Co. added 1 percent to 38.78 yuan. Shinva Medical Instrument Co. gained 1.2 percent to 34.66 yuan.

--Zhang Shidong. With assistance from Bonnie Cao in Shanghai. Editors: Allen Wan, Darren Boey

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at +86-21-6104-3040 or szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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