China shares fall on bleak profit outlook

SHANGHAI — Chinese shares fell Tuesday on unease about a bleak outlook for corporate profits and declines on Wall Street and elsewhere in Asia.

The benchmark Shanghai Composite Index dropped 2 percent, or 36.98 points, to close at 1863.37. The Shenzhen Composite Index for China's smaller second market shed 2.9 percent to 571.62.

Buying sentiment was dampened by Wall Street's 1.5 percent decline overnight and falls in Tokyo and Hong Kong.

Analysts said the government's report Tuesday that December exports fell 2.8 percent from the previous year, worsening a trade slump, was expected and had little impact.

"Investors turned numb about the bad economic figures," said Xu Zhiyuan, an analyst for Capital Edge Investment & Management in Shanghai. "Buying enthusiasm is still weak. Fluctuation has been the main feature of the market lately."

Banks tumbled after Shenzhen Development Bank said its 2008 profit would fall 77 percent from the previous year.

Shenzhen Development Bank dived 4 percent to 9.47 yuan. Industrial & Commercial Bank of China Ltd., China's biggest commercial lender, lost 2.2 percent to 3.48 yuan. Bank of China Ltd. slipped 1.7 percent to 2.92 yuan, while China Construction Bank Ltd. dropped 1.9 percent to 3.68 yuan.

Airlines were dragged down by China Eastern Airlines Ltd.'s profit warning a day earlier following losses on fuel price hedging.

China Eastern sank 5.4 percent to 4.20 yuan, while Air China Ltd. dropped 5.2 percent to 4.20 yuan.

Steel and auto shares bucked the downward trend and rose after a news report said the government's multibillion-dollar stimulus plans for the two sectors would likely be formalized on Wednesday.

Xinjiang Bayi Iron & Steel Co. rose 2.9 percent to 6.45 yuan, while Shenyang Jinbei Automotive Co. surged by the daily limit of 10 percent to 2.86 yuan.

In currency markets, China's yuan weakened to 6.8382 to the U.S. dollar in over-the-counter trading around 0800 GMT, down from Monday's close of 6.83475.

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