Developers and commodity firmsfare poorly as trading resumes

SHANGHAI - Stocks on the Chinese mainland fell on the first trading day after the Spring Festival holiday, led by developers and commodity producers, after the central bank raised interest rates to tame inflation.

China Vanke Co, the nation's largest developer, slumped 1.96 percent as Credit Suisse Group AG said the rate increase may "trouble" asset prices. Jiangxi Copper Co and Aluminum Corp of China Ltd tumbled after metal prices retreated. Heilongjiang Agriculture Co rose among farming-related companies amid speculation a drought in the north will push up grain prices.

An outdoor advertisement for China Vanke Co in Shanghai. The property company's shares declined 1.96 percent to 8.02 yuan ($1.22) on Feb 9, 2011. [Photo/China Daily]

"Curbing inflation is the government's top priority this year," said Wu Kan, a fund manager at Dazhong Insurance Co, which oversees $285 million. "The rate hikes will drag on economic growth. There may be two or three more interest-rate hikes this year that may total 0.75 to 1 percentage point."

The Shanghai Composite Index dropped 0.89 percent to 2,774.07 at the 3 pm close on Wednesday. The CSI 300 Index slipped 1.18 percent to 3040.95.

A gauge tracking property stocks on the Shanghai index fell 2.1 percent, the biggest decline since Jan 20. China Vanke lost 1.96 percent to 8.02 yuan ($1.22) on Wednesday. Poly Real Estate Group Co retreated 3.02 percent to 12.51 yuan, the lowest close since Dec 30.

Related readings:  China's stocks close lower - Feb 10  Rate hike 'aims to help tame inflation'  China Vanke says Nov property sales up 146%

Jiangxi Copper retreated 4.12 percent to 38.13 yuan on Wednesday. Aluminum Corp of China sank 3 percent to 10.36 yuan, the most since Nov 23. Zhuzhou Smelter Group Co, the nation's largest producer of refined zinc, fell 1.02 percent to 14.61 yuan.

"A rate increase was within expectations," Yang Jun, an analyst at Hongyuan Futures Co, said from Beijing. "What the market is really looking out for now is the frequency of rate hikes. If it accelerates, it will affect commodities demand further out."

Heilongjiang Agriculture, the country's third-largest listed food producer, soared 8.33 percent to 14.70 yuan, the most since Oct 11. Gansu Dunhuang Seed Co, a producer of grain and vegetable seeds, climbed 5.44 percent to 34.32 yuan. Gansu Yasheng Industrial (Group) Co surged 9.75 percent to 7.09 yuan on Wednesday.

Fertilizer producers also advanced on Wednesday. Yunnan Yuntianhua Co advanced 2.98 percent to 24.54 yuan. Guizhou Chitianhua Co climbed 2.03 percent to 6.04 yuan.

Agricultural Bank of China Ltd lost 0.76 percent to 2.60 yuan on Wednesday.

Hunan Corun New Energy Co, a continuous nickel foam producer, rose 3.4 percent to 24.35 yuan, the highest close since its listing in September 2003. The company will acquire a battery unit from Panasonic Corp for 40 million yuan, it said in a statement to the Shanghai Stock Exchange.

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