SHANGHAI, China—Chinese shares fell Monday after the country's biggest oil refiner reported weak first-quarter earnings amid concern about rising crude prices.
The benchmark Shanghai Composite Index fell 2.3 percent to 3,474.72. The Shenzhen Composite Index for China's smaller second market fell 1.3 percent to 1,045.03.
"It looks like investors needed to take a breather from last week's rally. Just look at today's low trade volume," said TX Investment analyst Qiu Yanying.
Turnover in Shanghai on Monday totaled 111.74 billion yuan (US$15.9 billion; euro10.2 billion), down 42 percent from Friday.
The Shanghai index surged 15 percent last week after Beijing tried to boost slumping markets by cutting taxes on stock trading and saying it would curb sales of previously nontradable shares.
Last Thursday, the Shanghai index surged 9.3 percent in its largest single-day gain in percentage terms since Oct. 23, 2001.
"The key focus of Monday's session was oil refiners, following the release of Sinopec's weak first-quarter earnings. The fact that oil prices hit a record high made a bad picture worse," Qiu said.
Shares of Sinopec, or China Petroleum & Chemical Corp., fell 4.4 percent after it said first-quarter profits fell 69 percent from the same time last year.
Chinese oil companies have suffered heavy losses on refining due to government controls that bar them from passing on record crude prices to consumers. Companies have been subsidizing their refining losses with profits from their drilling units.
New York crude oil futures hit a record high of US$119.93 a barrel on Monday after the weekend shut-in of a pipeline system that carries 700,000 barrels of North Sea crude a day to the U.K.
PetroChina, the publicly traded arm of China's biggest oil company, China National Petroleum Corp., fell 4.3 percent. The company accounts for 20 percent of the Shanghai index and each 5 percent decline in its price cuts 100 points off the index, according to analysts.
Despite Monday's losses, analysts were generally optimistic about the market's outlook.
"I'm not bothered by today's decline. It's just a temporary reaction to Sinopec's weak first-quarter earnings, which investors had been expecting anyway," said Southwest Securities analyst Yan Li.
"Beijing has already made it clear it's behind the stock markets," she said. "The only thing people are debating now is how much further the Shanghai index will rise, whether it's to 4000 or 4500."
China's currency, the yuan, rose to 7.0044 to the U.S. dollar on the over-the-counter market, up from Friday's 7.0100.
