BEIJING (XFN-ASIA) - China A-shares finished the morning session lower after yesterday's earthquake in the southwestern province of Sichuan and the 50 basis-point hike in the bank reserve requirement, dealers said.

The 7.8-magnitude earthquake, which led to the suspension of 66 stocks based in the disaster zone today, was the worst to strike China since the Tangshan quake in 1976 that claimed 242,000 lives.

The central bank's reserve hike, effective May 20, will push the reserve requirement for commercial banks to a record 16.5 pct.

The benchmark Shanghai Composite Index ended the morning down 93.43 points or 2.58 pct at 3,533.55.

'The earthquake will have only limited impact on China's economy. It will negatively affect sentiment at domestic bourses, rather than their fundamentals,' said Zhang Gang, an analyst at Central China Securities.

'It is inflation concerns that continued to weigh on the market,' Zhang added.

The National Bureau of Statistics said yesterday that the consumer price index rose 8.5 pct year-on-year in April, up from 8.3 pct in March but slightly below February's nearly 12-year high of 8.7 pct.

The market is likely to continue fluctuating untill inflation eases in the following months, Zhang said.

'However, the reserve requirement hike is expected to reduce the possibility of further interest rate hikes in the near term,' he added.

China Life Insurance (SHA 601628; HK 2628) tumbled 5.45 pct to 31.39 yuan, while China Pacific Insurance (SHA 601601) lost 6.32 pct to 24.92 yuan.

Ping An Insurance (Group) Co of China (SHA 601318; HK 2318) was suspended from trading today pending a shareholder meeting.

China Construction Bank (SHA 601939; HK 939) fell 3.27 pct to 7.40, while Bank of China (SHA 601988; HK 3988) shed 2.59 pct to 4.88. Industrial and Commercial Bank of China (ICBC) (SHA 601398; HK 1398) was down 1.79 pct at 6.05 yuan.

Bank of Communications (SHA 601328; HK 3328) lost 1.99 pct to 9.35 yuan after announcing that 13.243 bln of its A-shares will come out of lockup on May 16.

Haitong Securities (SHA 600837) slipped 4.65 pct to 53.30 yuan and CITIC Securities (SHA 600030) fell 3.42 pct to 35.91.

Air China (SHA 601111; HK 0753) lost 4.89 pct to 13.61 yuan, while China Eastern Airlines (SHA 600115; HK 0670; NYSE CEA) fell 3.56 pct to 10.03. China Southern Airlines (SHA 600029; HK 1055; ADR ZNH) was down 4.62 pct at 11.35.

PetroChina (SHA 601857; HK 0857) , the biggest index component, tumbled 3.75 pct to 17.19 yuan, while China Petroleum & Chemical Corp (Sinopec) (SHA 600028; HK 0386; NYSE SNP) lost 2.73 pct to 11.76 yuan.

China United Telecommunications (SHA 600050) fell 3.68 pct to 9.42 yuan after announcing that 1.06 bln of its A-shares will come out of lockup from May 19.

Cement stocks and steelmakers gained on expectations of higher prices as reconstruction after the earthquake is expected to increase demand for their products.

Jiangxi Wannianqing Cement (SZA 000789) rose by the 10 pct daily limit to 10.00 yuan, while Tangshan Jidong Cement (SZA 000401) gained 6.67 pct to 18.24 yuan. Anhui Conch Cement (SHA 600585; HK 0914) was up 4.57 pct at 63.65.

Xining Special Steel (SHA 600117) advanced 6.14 pct to 15.90 yuan, while Wuhan Iron & Steel (SHA 600005) and Angang Steel (SZA 000898; HK 0347) added 2.65 pct and 1.72 pct, respectively, to 17.42 yuan and 22.48 yuan.

Medical and pharmaceutical stocks also outperformed today.

Southwest Synthetic Pharmaceutical (SZA 000788) and Yunnan Baiyao (SZA 000538) both rose by the 10 pct daily limit to 7.76 yuan and 32.27 yuan, respectively. Jilin Aodong Medicine Industry (SZA 000623) gained 1.23 pct to 42.78.

The Shanghai A-share Index fell 98.10 points to 3,707.65, while the Shenzhen A-share Index was down 15.20 points at 1,153.09.

The FTSE/Xinhua China A 50 Index was down 326.12 points at 13,825.31 and the FTSE/Xinhua China A 200 Index fell 220.04 points to 10,611.08.

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