China stocks end down 0.7 pct on Chalco, Baosteel

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.

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