International Markets

China shares fall on economic policy uncertainty

11/24/09 03:12 EST

SHANGHAI -Chinese shares retreated Tuesday on policy uncertainty ahead of the government's annual economic planning meeting.

The benchmark Shanghai Composite Index plunged by 115.14 points, or 3.5 percent, to close at 3,223.53. The Shenzhen Composite Index for China's smaller second exchange lost 4.3 percent to 1,175.01.

Investors worry that the government meeting this month might issue policy changes that could reduce liquidity, said Zheng Gang, an analyst for Yingda Securities in the southern business center of Shenzhen. Regulators ordered Chinese banks on Monday to control lending and manage risks better.

Before Tuesday's decline, the market had gained 11.4 percent this month.

"With such a rapid growth pace, investors are scared at anything that might move the market," said Zheng.

Bank and resources heavyweights led the drops.

Industrial & Commercial Bank of China Ltd., China's biggest commercial lender, shed 2.7 percent to 5.32 yuan. Bank of China Ltd. slipped 2.3 percent to 4.25 yuan, while China Construction Bank Ltd. dropped by 2.9 percent to 6.1 yuan.

PetroChina Ltd., Asia's biggest oil and gas producer, lost 3 percent to 13.68 yuan, while China Petroleum & Chemical Corp., Asia's largest refiner by capacity, declined by 3.9 percent to 12.15 yuan.

Medical shares fell after surges in previous sessions. Shenzhen Neptunus Bioengineering Co. lost 6.7 percent to 19.5 yuan, while vaccine maker Hualan Biological Engineering Co. declined 5.5 percent to 58.34 yuan.

Steelmakers rose on higher steel prices. Baoshan Iron & Steel Co., China's biggest steel producer, gained 3.4 percent to 8.23 yuan. Inner Mongolia BaoTou Steel Union Co. advanced 7 percent to 5.18 yuan.

In currency markets, the yuan weakened to 6.8293 to the U.S. dollar, down from Monday's close of 6.8281.