Markets dip on last day

Chinese stocks fell 0.71 percent on the last trading day before the Spring Festival holiday, weighed down by negative earnings announcements and overnight Wall Street losses.

The Shanghai Composite Index ended at 1990.657 points, retreating from an intraday high of 2008.788 in the afternoon but managing a gain of 9.3 percent since the start of the month. The Shenzhen Component Index was down 0.51 percent to 7015.

Combined turnover shrank to 95.27 billion yuan from 103.65 billion yuan on Thursday.

"Investors are worried that more bad news might be revealed in the coming quarter, with more listed companies releasing their annual reports," said Dong Chen, senior analyst at CITIC China Securities.

Metals producers dropped after Aluminum Corp of China Ltd (Chalco) and Yunnan Copper Industry Co reported lower profits.

Chalco, the nation's biggest maker of the lightweight metal, lost 2.1 percent after it said in a statement that the company's net profits for 2008 may drop more than 50 percent year-on-year. Yunnan Copper, China's No 3 producer of the metal, also slid 2.1 percent.

According to a survey by Sina.com, around 65 percent of investors will hold stocks during the Spring Festival, with some expecting a bullish run after the holiday. The remaining 35 percent chose to sell out shares before the holiday.

Haitong Securities said in a report that around 11.2 billion non-tradable shares from 107 listed companies will be unlocked in February, with the total amount up 35.93 percent over the previous month.

But the A-shares have been of value for long-term investors, according to the report. Based on listed company's performance for 2007, the P/E ratio for A-shares now hovers around 16, indicating the average annual return for A-shares should be 6.2 percent, exceeding the yield of five-year fixed deposit.

After the government cut the interest rates several times in the fourth quarter of 2008, the interest rate for a five-year fixed deposit has dropped from 5.85 percent in September to the current 3.6 percent. And most of the bonds' yield is also below 3 percent.

China's markets will be closed all of next week for the Lunar New Year holidays.

(China Daily 01/24/2009 page10)