China Stocks May Ease On Tuesday

The China stock market has risen sharply now in three straight sessions, adding nearly 8% in the process - although analysts say the Shanghai Composite Index could face a minor correction on Tuesday as investors consolidate gains from the current run.

Equity markets throughout the region are projected lower on Tuesday. The U.S. stock markets kicked off their trading week on a weak note after Microsoft withdrew its offer to buy Yahoo Inc, while record oil prices also lend negative sentiment. Also, several bourses in the Asian region are in the midst of winning streaks and are due for a spell of profit taking.

The market finished sharply higher again on Monday, after being closed on Thursday and Friday for the Labor Day holiday. Lifting the Shanghai Composite was news from Beijing that regulators will intensify their scrutiny over IPOs in an effort to promote a more stable market development. Among the individual sectors, airlines and nonferrous metals provided support for the market.

For the day, the index gained 67.90 points or 1.84% to close at 3,761.01 after trading between 3,696.70 and 3,768.22 on turnover of 147.57 billion yuan.

The airlines - battered recently on soaring fuel costs - staged a comeback as Air China, China Eastern Airlines and China Southern Airlines all rose by the 10% daily limit, while Shandong Gold-Mining, Zhongjin Gold and Zijin Mining also closed 10% higher.

Among the other gainers, Aluminum Corp of China (Chalco) gained 6.29%, while Jiangxi Copper was up 4.76%, China United Telecommunications (Unicom) gained 1.41%, ZTE Corp rose 3.64%, Angang Steel gained 4.14%, Maanshan Iron & Steel advanced 4.06%, Wuhan Iron & Steel was up 1.77%, PetroChina rose 0.55%, China Petroleum & Chemical Corp (Sinopec) jumped 4.86%, GD Power Development added 2.92%, Huaneng Power International rose 1.76% and Huadian Power International gained 1.23%.

Wall Street offers a pessimistic lead after ending Monday's session lower on the Microsoft news and the oil prices. Microsoft's decision to scrap the deal came after the software maker said it was willing to pay $33 per share for Yahoo, a $2 increase from its previous offer price, while Yahoo demanded at least $37 per share.

Higher commodity prices also pressured the markets, fueling concerns that inflation may limit consumer spending. Crude oil rallied sharply and extended its record highs. Light sweet crude for June delivery closed the session at $119.97 a barrel, up $3.65 for the session. Oil hit an intraday high of $120.36 a barrel, smashing the old record high of $119.93 a barrel.

Prices moved higher amid further supply concerns in Africa. Nigeria, the continent's top producer, may limit supplies after militant attacks last week, according to reports. A Nigerian rebel group reportedly took responsibility for an attack on a Shell oil flow station.

The major averages traded in a range for most of the afternoon, ending the day firmly negative although well off of their intraday lows. The Dow closed down 88.66 points or 0.7% at 12,969.54, the Nasdaq closed down 12.87 points or 0.5% at 2,464.12 and the S&P 500 closed down 6.41 points or 0.5% at 1,407.49.

In economic news, Vietnam will spend $160 million to buy 3.5 billion kWh of electricity this year from China, the Vietnam News reported Monday. The Electricity Vietnam (EVN), the country's biggest electricity producer and sole distributor, will have to pay 4.5 U.S. cents for each imported kWh of electricity. The state-owned EVN bought 2.67 billion KWh of electricity from China's Yunnan province in 2007 and is expected to increase its output by around 15% this year, while local demand is estimated to rise by 17 to 18%.

In corporate news, Citibank (China) Co saw operating income grow 99% to CNY2.2 billion in 2007, the company said on Monday, after net income reached CNY665 million last year. Deposits grew 70% last year while loans were up 30%, the statement said. The loan deposit ratio was well under the 75% regulatory requirement set by Beijing for foreign banks' locally incorporated units. (RTTNews)