SHANGHAI - Investors should sell shares of Chinese cement and metal companies as increases in labor costs will curb capital spending in those industries, according to BofA Merrill Lynch Global Research.

"We believe the market may have underestimated the negative impact on corporate capex desire, and thus overall investment in China," Merrill Lynch strategists led by David Cui wrote in a report obtained on Monday. "Investors should continue to sell investment-led sectors, particularly cement and non-ferrous producers."

Seven Chinese provinces raised minimum wages in the first quarter after halting them last year amid the global recession, according to the Labor Ministry.