China shares fall, tracking Wall St. decline

SHANGHAI, China—Chinese stocks fell Tuesday as investors reacted to overnight losses on Wall Street and to reports of slowing growth in corporate earnings.

The benchmark Shanghai Composite Index dropped 2.6 percent or 63.29 points to 2,350.08. The Shenzhen Composite Index fell 4 percent to 646.47 yuan.

Airlines slumped as oil prices rebounded above $115 a barrel. China Eastern Airlines lost 8.75 percent to 4.90 yuan and Air China slipped 7.9 percent to 5.63 yuan. Both carriers were expected to release first half earnings figures later in the day.

Baoshan Iron & Steel lost 5.8 percent to 6.30 yuan after announcing it plans to reduce steel prices later this year due to softening demand.

Despite a 7.6 percent gain in the Shanghai benchmark on Aug. 20, spurred by a research report suggesting the government is planning a major economic stimulus package, the market appears to still be mired in a long downward correction.

Major banks also fell, with Shanghai Pudong Development Bank down 2.4 percent at 20.75 yuan and Bank of China shedding 2.5 percent to 3.56 yuan.

Analysts said that a report by the state-run Shanghai Securities News that listed companies' profits grew less than half as fast in the first half of 2008 than in the same period a year earlier further sapped buying sentiment.

Based on interim statements by 1,178 publicly traded companies, corporate net profits rose by about 31 percent in January-June, compared with a 70 percent increase in the first half of 2007, it said, forecasting that overall profit growth would be between 20 percent and 30 percent.

"As you can see, investors are disappointed in the below-expectations earning reports, which clearly depict a downtrend in the overall economy," said Zhang Xiuqi, an analyst at Guotai Junan Securities in Shanghai.

In currency dealings, the U.S. dollar was trading at 6.8533 around 0800 GMT on the over-the-counter market, up from Monday's close of 6.8483.