Nerves of steel
China's heated growth weighs on metals stocks
By Barbara Kollmeyer, CBS MarketWatch
Last Update: 9:00 PM ET May 2, 2004
cbs.marketwatch.com
LOS ANGELES (CBS.MW) - News is pouring out of China almost faster than investors can keep up, but the message is clear: economic growth is too hot. And the steel industry, in particular, is feeling the pressure.
China stopped construction of a huge steel project near Shanghai last week on concerns of runaway investments in that industry. The move follows new government rules that force companies investing in steel projects to contribute at least 40 percent of total investment, allowing banks to lend only the remainder.
Commodity-related stocks have sold off on fears that China -- the world's biggest importer and exporter of steel -- will decrease its seemingly insatiable demand for this and other metals.
China investors are bracing for more drastic measures, including a possible interest rate hike.
"There's concern over raw material suppliers of steel, and a lot of concern on end demand, because steel prices have been so strong," said Terrence Gray, manager of the Scudder New Asia fund (SAF: news, chart, profile). Autos, construction and appliances are just a few industries that could be impacted, he said.
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