China's stock market fell sharply on Tuesday because of slowing corporate profit growth and weak overseas markets. The Shanghai Composite Index closed down 2.62 percent at 2,350.084 points. That was off an intra-day low of 2,327.220 points, but not far from the index's 20-month intra-day low of 2,284.585, hit last week.
Trade was very thin as most investors fled the market. Turnover in Shanghai A shares totalled 31.2 billion yuan ($4.6 billion), up only slightly from 26.8 billion yuan on Monday, which was its lowest level since November 2006. Losing stocks in Shanghai outnumbered gainers by 869 to 66. Brokerage shares, often viewed as an indicator of the outlook for the overall market, were among the biggest losers with the largest listed securities firm, CITIC Securities, down 4.32 percent to 17.93 yuan.
Many analysts and fund managers see major technical support for the index at 2,245 points, its high in 2001. But with the index down 62 percent from last October's peak and showing no clear signs of bottoming, many do not rule out an eventual break of that support.
The index jumped nearly 8 percent last Wednesday after a report by J.P. Morgan's chief China economist Frank Gong said China's leadership was considering a major economic stimulus package that would include fiscal spending and monetary easing. But since then Chinese official media have not confirmed such a plan, and Gong said on Tuesday that the report was based on his own research rather than official sources.
"The quick collapse of the rebound has damaged investor sentiment further," said Zhou Lin, analyst at Huatai Securities. The market still expects some form of stimulus package, but Zhou said there was a risk that investors could be disappointed by the contents.
The official Shanghai Securities News calculated on Tuesday that with 1,178 of China's more than 1,500 listed companies having reported first-half earnings, their combined net profits were up 31 percent, down from nearly 70 percent growth in the first half of last year for comparable companies.
The figures were no surprise, but they underlined how a slowing economy and a plunge of investment earnings due to the stock market's slump are crimping profits. Some analysts think corporate profit growth may slow to zero next year. Coal shares dropped sharply on Tuesday, with Shanxi Coking down 9.50 percent to 6.00 yuan as coal stocks at power plants continued to recover with demand declining.
CITIC Bank outperformed, soaring its 10 percent daily limit at one stage and ending up 4.11 percent at 5.57 yuan in its heaviest trade since January. China Life, the country's top life insurer, lost 0.87 percent to 25.02 yuan, underperforming a rise of nearly 2 percent in its Hong Kong-listed H shares.
The company posted a 32 percent decrease in first-half net profit, to 15.8 billion yuan under international accounting standards, as a drop in China's equity market hurt the company's investment income. But the result beat analysts' consensus forecast of 11.7 billion yuan.
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