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Shanghai shares slip 1.42% on poor PMI data
Aggregated Source: Shanghai Daily: Business

SHANGHAI stocks dropped this morning after data suggested that China's manufacturing activity contracted further in June to a nine-month low while commodity producers slumped after US Federal Reserve Chairman Ben Bernanke hinted to slow the pace of bond purchases.

The key Shanghai Composite Index lost 30.42 points, or 1.42 percent, to 2,113.03. Turnover was 31.8 billion yuan (US$5.2 billion) by midday.

HSBC's Flash China Purchasing Managers' Index, the earliest indicator of China's economic condition, fell in June to 48.3 from 49.2 in May, HSBC Holdings PLC said today.

A reading above 50 indicates that activity is expanding.

"Manufacturing sector are weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures," said Qu Hongbin, chief China economist at HSBC.

"China prefers to use reforms rather than stimulus to sustain growth, which can boost long-term growth prospects but have a limited impact in the short-term," Qu said.

Commodity producers led the market down after Bernanke said yesterday that the Fed may moderate its aggressive bond-buying program this year and end it next year as he expects the economy to recover and unemployment to fall.

Gold producers tumbled after gold fell to a four-week low overnight. Zijin Mining Group Co, the nation's largest gold producer, fell 2.1 percent to 2.78 yuan. Zhongjin Gold Corp lost 2.7 percent to 10.58 yuan.

Coal miners also declined. Shanxi Lanhua Sci-Tech Venture Co fell 2.4 percent to 14.25 yuan. Yangquan Coal Industry (Group) Co lost 1.9 percent to 10.23 yuan. China Shenhua Energy Co, the nation's biggest coal producer, fell 1.2 percent to 18.19 yuan.

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