China stocks end down 0.7 pct on Chalco, Baosteel

SHANGHAI, March 30 (Reuters) - China's main stock index fell back from near major chart resistance on Monday, dragged down by Aluminum Corp of China (Chalco) and Baoshan Iron & Steel Co (Baosteel) after the industry giants posted quarterly losses. But loose money market liquidity continued to encourage buying in second-tier stocks by short-term speculators, helping China greatly outperform many Asian markets, which dropped sharply after a U.S. auto industry task force rejected turnaround plans for General Motors and Chrysler. Renewed talk that China might soon launch a planned Nasdaq-style second board for start-up firms buoyed brokerages and several other shares with links to venture capital. The Shanghai Composite Index ended down 0.69 percent at 2,358.040 points, off a low of 2,348.527, as it pulled back from near February's five-month peak of 2,402.807 points. But rising Shanghai A shares slightly outnumbered losers by 456 to 446, and turnover in Shanghai A shares remained active at 126.6 billion yuan ($18.5 billion), though it shrank from Friday's 162.0 billion yuan. Analysts said that barring a collapse of foreign markets, the Shanghai index might well rebound to the 2,400-point area later this week, though a sustained rise above that level would probably require stronger signs of a Chinese economic recovery. 'The poor earnings numbers will not have a lasting effect as investors had been expecting them to some extent, and loose liquidity in the market could prevent the index from falling too far,' said Cao Xuefeng, analyst at Western Securities. The head of the central bank's research department said at the weekend that bank lending remained relatively strong in March. An explosion of lending in the past several months has helped the stock market both by raising hopes for an economic recovery, and by channelling some money indirectly into stock speculation. The Shanghai index is heading for a 30 percent gain this quarter, which would make it the world's best-performing major stock index. CHALCO Chalco, the world's largest aluminium firm by market value, sank 3.76 percent to 10.49 yuan on Monday after posting a bigger-than-expected net loss in the fourth quarter, its first deficit in a decade, and warning of a first-quarter loss. Baosteel, China's top steel maker, sagged 2.52 percent to 5.80 yuan after reporting a 6 billion yuan fourth-quarter net loss and forecasting its revenue would drop 27 percent in 2009. But China United Telecommunications, the most heavily traded stock, rose 1.43 percent to 5.68 yuan ahead of the annual earnings of its Hong Kong-listed affiliate China Unicom , expected later in the day. Chinese banks' A shares performed far better than their Hong Kong-listed H shares. The H shares of China Construction Bank plunged 9.57 percent to HK$4.25 after the bank posted a worse-than-expected 30 percent drop in fourth-quarter earnings, but its A shares fell only 1.15 percent to 4.31 yuan. Investors see the A shares as less exposed to distressed selling by foreign investors than the H shares, while price premiums for A shares of Construction Bank and some other Chinese blue chips over their H shares shrank earlier this month, easing worries about high valuations. The launch of a board for start-up firms would not necessarily be positive for the main stock market; many analysts fear it could drain funds from the main market. But on Monday at least, investors focused on the positive aspects of speculation about an imminent launch, including the possibility of new business for brokerages. CITIC Securities rose 2.98 percent to 24.91 yuan, while Sinolink Securities soared its 10 percent daily limit to 34.22 yuan after saying its net profit in 2008 had more than doubled. Shanghai DaZhong Public Utilities, whose major shareholders include a venture capital firm, surged 7.43 percent to 10.56 yuan. Sinopec Corp lost 1.32 percent to 8.97 yuan despite posting a near doubling of profit for the fourth quarter and forecasting its first-quarter earnings would rise more than 50 percent year-on-year. It said it expected full-year 2009 to be challenging. ($1 = 6.83 Yuan)