April 12, 2017 / 7:25 AM / 7 months ago

China stocks slip as infrastructure shares lose steam

SHANGHAI, April 12 (Reuters) - China stocks slid on Wednesday, as softer producer inflation data raised questions on the sustainability of the country’s economic recovery and some shares that had rallied on plans for a new economic zone lost steam.

The blue-chip CSI300 index fell 0.2 percent to 3,509.44, while the Shanghai Composite Index lost 0.5 percent to 3,273.83 points.

China’s producer price inflation cooled for the first time in seven months in March as iron ore and coal prices tumbled, pressured by fears that the country’s steel production is outweighing demand and threatening a glut of the metal this year.

But Wu Kan, head of equity trading at investment firm Shanshan Finance, said cooling inflation “has been largely expected”, citing recent weakness in commodity prices.

In his view, longer-term companies able to benefit from plans for the economic zone at Xiongan should benefit as such projects “will boost demand for building materials”.

Shares linked to infrastructure work surged after the zone was announced, and many cooled down on Wednesday.

Great Wall Motor, a Hebei-based car maker, dived 8 percent. The car maker had surged as much as 21 percent since April.

Guangdong-based developers and port operators surged on Wednesday, as Prime Minister Li Keqiang said the central government this year will formulate the development plan for Guangdong-Hong Kong-Macau Great Bay Area.

Sector performance was mixed, with gains led by developers and utilities.

Most listed lenders sagged after the banking regulator told lenders to conduct “self-inspections” in areas such as using loopholes to circumvent rules, in order to reduce leverage. The move will potentially hurt banks’ balance sheet. (Reporting by Luoyan Liu and John Ruwitch; Editing by Richard Borsuk)

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