SHANGHAI - Mainland stocks fell the most in almost two weeks, on concern that the government will intensify measures to curb real estate speculation and may raise interest rates to contain inflation.

China Merchants Bank Co and China Vanke Co led declines for financial companies and developers after China Business News reported that China will announce a new round of property tightening measures.

Ningbo Port Co, the operator of the world's second-busiest harbor by total throughput, slid 3.5 percent on its trading debut. Aluminum Corp of China Ltd jumped by the 10 percent limit after Xinhua News Agency reported its parent agreed to invest in rare earth production.

"Banking stocks don't present a big investment opportunity because the market is still concerned the government will have tight control over credit growth going forward, including possible interest rate increases," said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co in Shanghai.

The Shanghai Composite Index, which tracks the bigger of mainland stock exchanges, lost 16.61, or 0.6 percent, to 2611.35 on Tuesday, the most since Sept 16. It rose 1.4 percent on Monday, the most in three weeks. The CSI 300 Index dropped 0.8 percent to 2880.91 on Tuesday.

The Shanghai index has slid 20 percent this year as the government imposed tightening measures ranging from restrictions on multihouse purchases to a 7.5 trillion yuan ($1.12 trillion) annual limit on new lending by banks. The gauge has climbed 10 percent from this year's low on July 5 on signs that the nation's economic slowdown is stabilizing.

Merchants Bank retreated 1.8 percent to 12.61 yuan. Shanghai Pudong Development Bank Co, the Chinese partner of Citigroup Inc, slid 2.7 percent to 12.58 yuan. Huaxia Bank Co, partly owned by Deutsche Bank AG, fell 2.9 percent to 10.49 yuan.

Moody's Investors Service on Monday changed to stable from positive the outlook on the A1 long-term deposit and senior unsecured ratings for China's four largest banks, including Bank of China and Agricultural Bank of China. The outlook change reflects the likelihood of an upgrade in their ratings has diminished in view of their current challenges, Moody's said.

Hang Seng declines

Hong Kong stocks fell, sending the Hang Seng Index to its biggest drop in three weeks.

The Hang Seng Index fell 1 percent to 22109.95 on Tuesday.

The Hang Seng China Enterprises Index of H shares of mainland companies fell 1.1 percent to 12180.20 on Tuesday.

Bloomberg News

(China Daily 09/29/2010 page16)