China Shares End Slightly Lower; EU, Domestic Economic Worries ... - Wall Street Journal

SHANGHAI--China's shares ended slightly lower yesterday, surrendering gains from an early bout of bargain hunting, reflecting investors' continued concerns about the health of the domestic economy and general wariness ahead of a E.U. summit later this week.

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.2% at 2216.93. The Shenzhen Composite Index ended flat at 918.38.

"The gains in the morning were clearly due to bargain hunting after the (4.1%) decline in the past five sessions, but downside risks are still there," said Soochow Securities analyst Zhou Kaikai, putting immediate support for the Shanghai index at 2200.

Analysts said the benchmark index is likely to face further downward pressure in the near term as investors await fresh stimulus measures from Beijing and developments in Europe's financial troubles.

Mr. Zhou said even with the government's recent efforts to boost liquidity in the equities market, investors have had to struggle to digest mixed signals on the economy given the recent rebound in property sales, while a preliminary gauge of China's manufacturing activity released last week showed more weakness in June.

Metals companies led the market lower Wednesday as global metals prices fell amid a lack of optimism about the E.U. summit starting Thursday.

Chalco was down 1.9% at CNY6.27, Zijin Mining fell 0.8% to CNY3.87 and Yunnan Copper dropped 1.5% to CNY17.36.

Coal miners fell as declining global oil prices raised doubts about the prospects for the global economy. Yanzhou Coal Mining was down 1.2% at CNY19.38, China Shenhua Energy dropped 0.8% to CNY22.27 and Henan Shenhuo Coal & Power fell 1.7% to CNY8.80.

Goldman Sachs said in a note the A-share market could be volatile in the near term as recent policy-easing efforts aren't being felt yet, and "the near-term earnings risks are rising given weak demand has led to high destocking pressure and weakening profit margins."

The house also lowered its year-end target for the Shanghai index to 2,950 from 3,100 previously.

The July index futures contract, the most actively traded of the four index futures contracts traded in China, ended down 0.2% at 2454.8.

The futures are referenced to the CSI-300, an index of 300 Shanghai- and Shenzhen-listed yuan-denominated A shares. The CSI-300 ended 0.3% down at 2447.20.

Write to Yue Li at yue.li@dowjones.com