FXP: Shanghai metals near limit on equities-led sell-off
* Shanghai stocks lead fall in Asian shares from multi-month highs
* China's two big banks put cap on 2009 lending-reports
* China CSCEC's strong debut sparks asset bubble worries (Recasts, adds details, updates prices to Shanghai close)
By Manolo Serapio Jr.
MANILA, July 29 (Reuters) - Base metals in Shanghai fell sharply on Wednesday to levels just shy of their daily limits in an equity-led sell-off, fuelled by fears China may restrict lending in the second half which could lead to a liquidity squeeze.
China's two biggest state-owned commercial banks have put a lid on their 2009 lending targets, according to newspaper reports in Beijing, in a move that will significantly slow overall Chinese credit growth in the second half of 2009.
Asian shares tumbled from multi-month peaks on Wednesday, in a sell-off led by the Shanghai market, as investors booked profits ahead of more company earnings.
Shares in China State Construction Engineering Corp, whose $7.3 billion IPO last week was the world's largest in a year, jumped 70 percent at its debut, besting expectations -- but also stirring concerns about asset price bubbles. Copper surged to near 10-month highs earlier this week, leading a rally in base metals, as bullish investors raised their bets on a recovery of the global economy.
"However, we don't want a bubble occurring again whereby we have massive price rises and then it's not sustainable at those levels and once it starts coming off, panic selling enters the market," said Ciaran Moore at Halifax Investments.
Shanghai's third month copper fell 4.2 percent to close at 42,980 yuan ($6,293) a tonne, after falling as low as 42,530 yuan, near its 5 percent downside limit of 42,470 yuan.
The most-active November contract fell 1,960 yuan to 42,870 yuan a tonne.
Benchmark Shanghai aluminium slid 3.5 percent to 14,210 yuan and zinc fell 4.2 percent to 13,790 yuan at the close, after nearly hitting their floor for the day.
"Investors are afraid there will be a lack of money available for lending in the second half," said analyst Shao Hebin at Great Wall Futures.
The selling spree spilled onto LME metal, with three-month copper on the London Metal Exchange falling $104 to $5,426 a tonne by 0724 GMT, adding to Tuesday's $70 drop.
Still, some analysts say spreading optimism about a global economic recovery, fuelled by recent upbeat data and corporate earnings, is likely to make any correction short-lived.
Chinese demand had propelled copper prices to rise at least over 77 percent in 2009, compared to a more than 50 percent decline last year but the China factor is expected lose some steam in the second half.
ANZ senior commodity analyst Mark Pervan said "growing expectations that China is now well stocked should start to trigger an overdue price correction.
"However, the downturn could be short-lived, with a pullback in China restocking met by a seasonal fourth quarter rebound in restocking elsewhere," Pervan said in a note. Base metals prices at 0724 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 5426.00 -104.00 -1.88 3060.00 77.32 SHFE Cu* 42980.00 -1870.00 -4.17 23840.00 80.29 LME Alum 1805.00 -19.00 -1.04 1535.00 17.59 SHFE Alum* 14210.00 -515.00 -3.50 11540.00 23.14 COMEX Cu** 246.40 -5.10 -2.03 139.50 76.63 LME Zinc 1655.00 -35.00 -2.07 1208.00 37.00 SHFE Zinc 13790.00 -605.00 -4.20 10120.00 36.26 LME Nickel 16425.00 -205.00 -1.23 11700.00 40.38 LME Lead 1765.00 -2.00 -0.11 999.00 76.68 LME Tin 13925.00 -175.00 -1.24 10700.00 30.14 LME/Shanghai arb^ 389 Dollar/yuan 6.8314 \ 6.8338 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month (Editing by Ben Tan)
