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China Shares Sharply Lower By Midday; Bad Weather A Concern --China's shares are sharply lower Friday with investors cutting their positions as long holidays draw closer, amid concerns the economic impact from heavy snowfalls this winter may be larger than initially expected. At the midday break the benchmark Shanghai Composite Index, which tracks both A and B shares, has fallen 3.6% to 4227.95. Analysts put support for the index at the psychologically important 4000 level in coming days. The Shenzhen Composite Index is 5.2% lower at 1242.77. "The market is speculating that Beijing will set a relatively lower target for 2008 gross domestic product growth at the National People's Congress in March due to the severe snow, which will cut earnings forecasts for listed companies," said Wang Junqing, an analyst at Guosen Securities. Severe weather conditions across the country, with some areas suffering their worst snowfall in more than a decade, have led to transport chaos and disrupted supplies of food and fuel. Snow and ice have also snapped power lines, leading to energy shortages. The China Meteorological Administration has forecast that storms will continue through this weekend, leading into next week's long Lunar New Year holidays, when many Chinese travel to visit their families. Snowfall is expected to hit four central and eastern provinces, with parts of Hunan, already among the worst stricken, to see more than 15 millimeters (1/2 inch) over a six-hour period, the provincial weather bureau there said. More companies have said their production has been affected by the weather, which is raising concerns about first quarter earnings. Hunan Valin Steel Tube & Wire Co. shares fell 9.1% to CNY11.09 after the company said it had halted some of its output lines because of a shortage of power. Large-capitalized shares were also weak, a sign that institutional investors have started to withdraw from the market. PetroChina by midday had fallen 4.2% to CNY24.20 with Datang International Power Generation down 9.4% to CNY14.60. "The Shanghai index may continue to fall as investors are leaving the market to avoid uncertainties during the Lunar New Year holiday," said Zhang Gang, an analyst at Central China Securities. The stock markets will be closed from Feb. 6 to Feb. 12. Aside from worries at home, there remain concerns about the global economy and in particular the risk of more negative news on the credit market front, including from U.S. bond insurers. "The U.S. government is responding to worries over the impact of the subprime crisis by cutting rates (but) Beijing is maintaining its silence. Investors are worried this year's 'prudent' monetary stance may end up worsening China's economy," said Zhang Yidong, an analyst at Industrial Securities.
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