Shanghai's key stock index fell in the morning session today as blue chips in the banking and airlines sectors dropped along with heavyweights such as PetroChina.

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, was down 1.50 percent, or 54.20 points, to 3,558.34 at 11:30am.

Losers in the Shanghai market outnumbered gainers 558 to 271, while 24 were unchanged.

The Shenzhen Composite Index, which covers the mainland's smaller stock market, was up 0.29 percent, or 3.18 points, to 1,094.04.

PetroChina, the nation's biggest oil maker and market component in Shanghai, slumped 2.2 percent to 17.80 yuan (US$2.55) while Sinopec, Asia's biggest oil refiner, also fell 4.39 percent to finish the session at 12.19 yuan.

US crude futures yesterday dropped 59 cents to US$108.50, the day after refinery trouble in Europe spurred a US$3 jump. London Brent crude shed 80 US cents to US$106.34.

Blue chips in banking, airlines and the insurance sectors suffered losses this morning.

Industrial and Commercial Bank of China, the nation's biggest lender, slid 2.06 percent to 6.17 yuan while Minsheng Bank, the country's only-listed private-controlled bank, fell 3.28 percent to close the session at 8.85 yuan.

China Southern Airlines, the nation's biggest carrier by fleet size, decreased 3.61 percent to 16.01 yuan while Shanghai-based China Eastern Airlines, the third largest, also fell 3.17 percent to 12.53 yuan.

Ping An Insurance (Group) Co, China's second-biggest insurer, retreated 3.25 percent to 59.45 yuan.

On the positive side, Shanxi Taigang Stainless Steel Co, China's biggest stainless steel producer, edged up 0.58 percent to 17.30 yuan.

The company said its profit climbed 74 percent to 4.25 billion yuan in 2007 on increases in production and prices.

Shanghai Zhenhua Port Machinery Co, the world's biggest maker of container cranes, jumped the daily cap of 10 percent to 17.04 yuan.

Zhenhua said 2007 profit rose 25 percent to two billion yuan as it booked more orders for cranes for new and expanding port facilities worldwide. The company said it plans to sell two billion yuan worth of shares to its parent company for stakes in a factory and an office building.

The Shanghai market may drop another 21 percent after a five-month rout slashed the Shanghai Composite Index from its October record, Citigroup Inc said, citing the effect of lower shareholding values on corporate profits.

China's government will probably resist calls for measures to bolster the equity market because valuations have yet to reach "distress levels," Citigroup's head of China research Lan Xue said in a note dated yesterday.

The index may drop as low as 3,000 and rise to a maximum 4,000, Lan said, without specifying a time period. Yesterday's close of 3,790.69 was 41 percent below the record set on October 16.

China's stock market is the second worst-performer in the Asia-Pacific region this year amid concern the government's measures to tame 11-year-high inflation will slow earnings growth.

Growth in operating profit of listed companies may be insufficient this year to make up for losses on equity investments, which accounted for about a third of corporate earnings in 2007, according to the report.

(Shanghai Daily April 9, 2008)