Chinese stocks fell 1.75 percent on Monday in active trade, retreating from a nine-month intraday high and snapping a seven-day winning streak after economic data and a central banker's comments cast doubt on the economic recovery. China's first confirmed case of the H1N1 flu added to the uncertainty, although this also lifted the shares of several health care product firms.
The Shanghai Composite Index ended at 2,579.747 points, after posting its biggest weekly gain in seven weeks last week. Losing Shanghai A shares outnumbered gainers by 777 to 134, while turnover in Shanghai A shares jumped to 171.9 billion yuan ($25.2 billion) from Friday's 155.9 billion yuan. Deputy central bank governor Su Ning said on Monday that it was too early to judge if China's economic recovery was sustainable, adding that China should keep its monetary policy stable.
Chinese April price data released on Monday was also weak, although largely in line with expectations. Chinese consumer prices fell 1.5 percent in the year to April, the third straight monthly decline, while the producer price index dropped 6.6 percent, for a fourth consecutive monthly fall.
The index rose to a nine-month intraday high in early trade, lifted by comments over the weekend from Premier Wen Jiabao that supportive government steps for the economy would continue throughout the year. But analysts said the market had been poised for profit-taking after its protracted climb, supported in large part by ample market liquidity and signs of economic recovery fuelled by government policy steps, and may struggle to rise further in the near term.
"The index has gained 1,000 points (from last October's low), or about 60 percent, and after such a strong rebound it may have limited room to climb given pressure from valuations and profit-taking," said Haitong Securities analyst Zhang Qi.
Coal industry leader China Shenhua Energy lost 2.76 percent to 26.11 yuan while Jiangxi Copper sank 4.98 percent to 24.03 yuan. Analysts said government confirmation of China's first H1N1 flu case, announced during the midday break, added to uncertainty over the economic recovery and helped to trigger the sharp pull back in the afternoon, although Haitong Securities' Zhang said China was relatively well-prepared to handle the situation after its experience with bird flu.
Several health product shares gained as the flu virus spread. Guilin Layn Natural Ingredients, a health food products maker, surged its 10 percent daily limit to 19.90 yuan after soaring 59 percent over the past two weeks, although the company had said last week that the potential effect of a flu outbreak on its earnings was uncertain.
Da An Gene Co, a developer of gene diagnostic technologies and related products, surged its 10 percent daily limit to 12.43 yuan after it announced successful tests of its H1N1 flu virus testing kit in Hong Kong.