Profit warning triggers Hunan Nonferrous dive

PUBLISHED : Friday, 08 August, 2008, 12:00am
UPDATED : Friday, 08 August, 2008, 12:00am

Shares in Hunan Nonferrous Metals Corp, the mainland's biggest zinc and tungsten producer, fell as much as 13.07 per cent yesterday to the lowest since it went public more than two years ago after the company issued a profit warning.

The stock slumped to as low as HK$1.53 before closing at HK$1.56, down 11.36 per cent, lower than its initial offering price of HK$1.65 in March 2006.

By comparison, the H-share index fell 0.03 per cent while the Hang Seng Index closed with a gain of 0.7 per cent.

The Changsha, Hunan-based metal producer on Tuesday night said a substantial decrease in the average selling price of zinc products in the first six months of this year would affect its earnings, without giving any figures.

In the first half of last year, Hunan Nonferrous reported net earnings of 504 million yuan (HK$573.5 million).

However, for the full year, its profit shrank to 315 million yuan because of a provision for its zinc inventory after a price slump.

The price of zinc, a material to galvanize steel, slumped 35 per cent in London in the first half from a year ago as global supplies outstripped demand.

Analysts said the snowstorms early this year also hurt Hunan Nonferrous as some of its plants suspended production.

Shares in other metals stocks also fell yesterday on concerns the slowing global economic growth will cut demand.

Xinjiang Xinxin Mining Industry plummeted 11.08 per cent to settle at HK$3.05 while China Molybdenum lost 7.2 per cent to close at HK$5.41.

Gold producers Lingbao Gold dropped 9.24 per cent to HK$2.26 while Zhaojin Mining Industry fell 9.1 per cent to HK$7.09.

Steelmakers Angang Steel was down 5.41 per cent at HK$12.24 and Chongqing Iron & Steel slipped 6.16 per cent to HK$2.74.

'Recent pullbacks in commodity prices have been much more severely dealt with in equity markets. This reflects an increasing nervousness among investors,' said Citigroup analysts Alan Heap and Alex Tonks.

Demand for commodities was expected to slacken in the United States and Europe where growth was slowing, but the domestic economy would be robust enough to support demand, Citigroup said.

It expects commodities with severe supply constraints - coal, copper and aluminium - to outperform others.