SHANGHAI'S key stock index declined in the morning session today as concern increased that record oil prices will hurt earnings.

Losses would have been heavier, but most banks increased on the back of profit forecasts.

The Shanghai Composite Index dipped 0.52 percent, or 14.11 points, to 2,689.42 at 11:30am.

Gainers in the Shanghai market outnumbered losers 444 to 343 while
35 were unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was up 0.03 percent, or 2.23 points, to 812.

China Petroleum & Chemical Corp and PetroChina Co, the country's two biggest refiners, dropped on concern production costs will increase.

China Petroleum & Chemical Corp, or known as Sinopec, the country's biggest oil refiner, lost 1.34 percent to 9.60 yuan (US$1.40) while PetroChina, the biggest oil producer and the biggest market heavyweight, decreased 1.36 percent to 14.51 yuan.

Oil in New York was recently at US$145.50 a barrel after climbing yesterday to a record US$145.85. Crude has gained 52 percent this year.

Ping An Insurance (Group) Co, the nation's second-largest insurer, fell in the morning session even after saying it doesn't need to make financial provisions for its investment in Fortis, whose stock has plummeted 44 percent this year. Ping An was down 1.38 percent to 39.99 yuan.

On the positive side, most lenders rose in the early session.

Industrial & Commercial Bank of China Ltd, the world's biggest lender by market value, advanced 0.63 percent to 4.78 yuan. ICBC said it expects first-half profit to rise by more than 50 percent, according to a filing to the Shanghai stock exchange yesterday.

Shanghai Pudong Development Bank Co rose 3.04 percent to 21.04 yuan after saying first-half profit may have increased more than 140 percent on more lending, higher fee income and a lower tax rate.

Beiren Printing Machinery Holdings Ltd, the printing machine manufacturer, jumped 5 percent to 5.88 yuan. The company said it may post a loss in the first half of the year because of rising raw material costs, according to a stock exchange statement yesterday.

China Merchants Energy Shipping Co said yesterday its profit rose more than 80 percent in the first half of the year from a year earlier because of higher shipping rates and a gain of 120 million yuan from the disposal of two vessels. Merchants Energy edged up 0.31 percent to 6.51 yuan.

Shanghai Airlines Co rose 0.54 percent to 5.56 yuan. The carrier said it will be "very difficult'' to meet its profit target due to record jet fuel price, company President Fan Hongxi said today.(Shanghai Daily)