Shares drop on earnings, Japan rating

Updated: 2011-08-25 07:44

By Irene Shen (China Daily)

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SHANGHAI - Stocks on the Chinese mainland fell for the sixth time in seven days after the nation's biggest insurer reported slumping profit and a cut in Japan's debt rating by Moody's Investors Service added to concerns that global growth is slowing.

China Life Insurance Co declined more than 3 percent to a record low after first-half profit slid 28 percent.

"Japan's debt crisis isn't as serious a concern for China as the European and US credit crises, but it may add to the global uncertainty and shake investors' confidence in the economic outlook," said Li Jun, a strategist at Central China Securities Co in Shanghai.

"Shrinking trading volumes show liquidity is tight and sentiment is lackluster. That may be a signal for further declines in the index."

Japan's debt rating was lowered by Moody's, which cited "weak" prospects for economic growth that will make it difficult for the government to rein in the world's largest public debt burden.

The benchmark Shanghai Composite Index slipped 0.51 percent to 2541.09. The CSI 300 Index lost 0.39 percent to 2810.02, led by financial and material companies.

The Shanghai index has lost 9.5 percent this year as the central bank raised interest rates five times and ordered lenders to set aside more cash as deposit reserves 12 times since the start of 2010 to contain inflation that quickened to the fastest pace in three years last month.

The Shanghai index is valued at 11.7 times estimated earnings, compared with a four-year low of 11.57 set on Monday, according to data compiled by Bloomberg.

Stocks are approaching oversold levels after the Shanghai Composite Index fell 16 percent from this year's April 18 high, according to technical analysis by Nomura Holdings Inc.

The Shanghai gauge may climb to a resistance level of 2645, Tacky Cheng, a Hong Kong-based Nomura quantitative analyst, said in e-mailed comments on Tuesday.

China Life dropped 3.3 percent to 15.63 yuan ($2.45), the lowest since its listing in January 2007. First-half profit fell 28 percent to 12.96 billion yuan as declines in the domestic stock market hurt investment returns.

Ping An Insurance Group Co slid 0.9 percent to 40.61 yuan. China Pacific Insurance Group Co sank 1.4 percent to 20.10 yuan.

Jiangxi Copper Co, the biggest Chinese producer of the metal, lost 0.9 percent to 31.60 yuan. Shandong Gold Mining Co tumbled for a second day, losing 2.9 percent to 48.86 yuan. Zijin Mining fell 2.8 percent to 5.50 yuan.

John Wadle, an analyst at Mirae Asset Securities (HK) Ltd, said in a report on Tuesday that gold prices, trading near record highs, are an "absurdity waiting to correct".

Bloomberg News

(China Daily 08/25/2011 page17)