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Stocks dive 6.3% to 25-month closing low

(Agencies)
Updated: 2008-10-27 17:12

China's main stock index tumbled 6.32 percent on Monday to a 25-month closing low as worries about faltering corporate profits mounted during the peak week of the third-quarter earnings reporting season.

The benchmark Shanghai Composite Index ended at 1,723.35 points following its biggest daily drop in four months. It was barely above the intraday low of 1,721.60, its lowest since September 27, 2006.

Falling stocks in Shanghai overwhelmed gainers by 895 to 34, with more than 350 Shanghai A shares, including a number of sector leaders, plunging by their 10 percent daily limit.

Turnover in Shanghai A shares was light at 32.1 billion yuan ($4.7 billion), although up marginally from Friday's 31.6 billion yuan.

The index slipped in the morning through technical support at 1,802 points, a low hit in mid-September when the government stepped in with measures to support the market.

"The drop below the 1,800 level spurred panic selling," said Cao Xuefeng, an analyst at Western Securities.

PetroChina, the biggest stock in the index, tumbled 6.40 percent to 9.96 yuan.

Coal shares also fuelled the drop as coal prices tumbled. China Coal Energy, which listed in February, slid its 10 percent daily limit to 6.38 yuan after saying its net profit in the third quarter had risen 11.38 percent.

Cautious over earnings

China Pacific Insurance Group Co slipped 8.02 percent to 11.35 yuan after posting a 1.6 billion yuan loss for the third quarter.

Datang International Power slumped 10 percent to 5.25 yuan after saying its loss in the third quarter hit 432.86 million yuan and it expected earnings for the full year to be down 85 percent due to higher fuel prices.

Aluminum Corporation of China dropped 10 percent to 5.91 yuan after saying its net profit tumbled 93 percent to 182.90 million yuan, due to rising raw material costs and lower aluminium prices.

Banks were weak, with China Construction Bank down 5.14 percent at 3.69 yuan after saying its net profit growth in the third quarter slowed to 12 percent.

The market appeared to draw little support from the Ministry of Finance's announcement on Sunday that a previous move to scrap a 5 percent withholding tax levied on interest income would apply to cash held in individuals' brokerage accounts, in addition to bank deposits.

"Poor earnings and shaky overseas markets have driven more and more investors away. This sort of policy is not enough to boost investors' limited confidence," said Chen Jinren, analyst at Huatai Securities.

Property shares contributed to the drop, with China Vanke, the country's biggest listed developer, losing 10 percent to 5.88 yuan, after dropping 5.22 percent on Friday.

Ping An Insurance tumbled 7.7 percent to 20.87 yuan. Ping An and China Life will announce earnings after the close and investors fear they may show hefty losses on investments both domestically and overseas.

"Several big firms will publish their earnings tonight and investors are remaining cautious ahead of that," said Zhang Yanbing, analyst at Zheshang Securities.

"The index is expected to consolidate around technical support at 1,800 for a few days, but it will be hard for this level to hold given the gloomy conditions in the market," he said.

Despite the market's fall, the average premium of domestically listed Chinese shares to their Hong Kong-listed counterparts rose to 76 percent, up sharply from Friday's 58 percent.