China Stock Index Drops First Time in Eight Days; Cosco Falls

May 11 (Bloomberg) -- China’s stocks fell for the first time in eight days on concern gains that made the market the world’s fourth-best performer this year outstripped earnings growth prospects.

Zijin Mining Group Co., China’s largest gold producer, slid 4.4 percent, trimming its advance to 74 percent this year. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, retreated 6 percent after Credit Suisse Group AG downgraded its rating on Asian dry-bulk lines. China Shenhua Energy Co. dropped 2.8 percent after domestic power output fell during a part of April.

“Stocks have already moved ahead of the economic recovery and corporate earnings growth,” said Zhang Ling, a fund manager at ICBC Credit Suisse Asset Management Co. in Beijing, which oversees the equivalent of $7.21 billion. “With valuations so high, investors sold stocks to lock in some profit.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 45.90, or 1.8 percent, to 2,579.75 at the close, ending a seven-day, 9.3 percent advance. More than seven stocks fell for every one that rose. The CSI 300 Index, measuring bourses in Shanghai and Shenzhen, dropped 2.3 percent to 2,725.32.

Air China Ltd., the nation’s largest international carrier, retreated 5.2 percent after China confirmed its first case of swine flu.

The Shanghai Composite snapped a rally that had prompted warnings of a stock market “bubble” from China Galaxy Securities Co., the nation’s largest brokerage, and China Asset Management Co., the nation’s biggest fund company, over the past month.

Rebound

The benchmark index has rebounded 51 percent from last year’s low on Nov. 7, 2008, which marked the end of the 72 percent meltdown from the record in October 2007. Stocks have advanced on optimism a 4 trillion yuan ($585 billion) stimulus package and new loans will revive growth in the world’s third- largest economy.

The 14-day relative strength index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 69 yesterday. Some investors believe readings above 70 indicate a price is poised to fall.

China’s six-year interest-rate swaps dropped to the lowest in more than a month after the government said deflation accelerated in April, prompting traders to pare expectations for the pace of the economy’s recovery. Consumer prices fell for a third month on food and commodity costs in April, the statistics bureau said today.

New Lending

New lending eased to about 600 billion yuan last month, central bank governor Zhou Xiaochuan said in Basel today. The number is about a third of the record 1.89 trillion yuan in March. The official figure is due to be released this week.

Zijin Mining dropped 4.4 percent to 8.36 yuan. China Pacific Insurance (Group) Co., the nation’s third-largest insurer, lost 4.2 percent to 17.88 yuan, reducing the gain to 61 percent this year.

Jonjee High-Tech Industrial & Commercial Holding Co., the biggest gainer of 2009 so far on the Shanghai Composite, slumped 8.5 percent to 11.35 yuan, the most since Feb. 27. The stock has jumped 262 percent this year.

China Cosco slid 6 percent to 12.52 yuan. China Shipping Development Co., the nation’s biggest oil carrier, lost 6.6 percent to 13.18 yuan. Cosco Shipping Co., a unit of China’s biggest shipping company, fell 6.3 percent to 10.65 yuan.

Dry Bulk Rating

Asian dry-bulk shipping stocks were cut to “underweight” at Credit Suisse, which forecast industry-wide losses through 2010 on cooling demand, rising capacity and unprofitable rates.

Shenhua dropped 2.8 percent to 26.11 yuan. China Coal Energy Co., the nation’s second-largest coal producer, fell 5.3 percent to 10.62 yuan. Datong Coal Industry Co., the No. 3, slid 6.3 percent to 32.46 yuan.

China’s average daily power output in the middle 10 days of April dropped 3.9 percent to 9.14 million megawatt hours, the Ministry of Industry and Information Technology said today. Electricity generation accounts for most coal consumption in China.

Air China fell 5.2 percent to 6.54 yuan. China Southern Airlines Co., the nation’s biggest carrier by fleet size, lost 4.5 percent to 5.27 yuan, as swine flu cases spread. A 30-year- old man tested positive for the A/H1N1 virus and is under medical quarantine in southwestern China’s Chengdu city, the health ministry said.