China's Stocks Fall on Profit Concerns; Huaneng Power Drops

By Chua Kong Ho

Oct. 22 (Bloomberg) -- China's stocks fell, led by smelting companies and power producers, on speculation a slowdown in the world's fourth-largest economy will accelerate profit declines.

Jiangxi Copper Co., China's second-biggest smelter of the metal, declined 2.4 percent after third-quarter profit slumped 27 percent. Huaneng Power International Inc., a unit of the nation's No. 1 power producer, sank 4.3 percent after reporting a $322 million third-quarter loss on higher coal prices and tariff caps. Anhui Conch Cement Co. slid 4.3 percent, leading cement producers lower as profit trailed some analyst estimates.

The CSI 300 Index, which tracks yuan-denominated stocks traded in Shanghai and Shenzhen, declined 31.54, or 1.7 percent, to 1,849.87 at 9:43 a.m. local time, extending this year's drop to 65 percent. About 18 stocks fell for each that advanced, with all 10 industry groups on the index lower.

``Surging costs have hit power producers badly even as electricity consumption has fallen due to the economic slowdown,'' said James Liu, who oversees about $1 billion as deputy chief investment officer at APS Asset Management in Shanghai. ``Overall market sentiment remains poor. I expect the government to introduce more measures to stimulate the economy.''

China's economy grew 9 percent in the third quarter from a year earlier, the statistics bureau said Oct. 20, the slowest pace in five years as the global financial crisis cut demand for exports.

Power Producers

Jiangxi Copper fell 2.4 percent to 10.60 yuan, after saying profit in the third quarter declined 27 percent to 919.5 million yuan, due to lower prices of the metal. Zhuzhou Smelter Group Co., China's largest zinc smelter, plunged 2.9 percent to 4.36 yuan, after reporting a third-quarter loss of 5 million yuan.

Huaneng Power lost 4.3 percent to 6.46 yuan, as it reported a 2.2 billion yuan loss in the third quarter, due to higher coal costs and state caps on electricity tariffs.

GD Power Development Co., northeastern China's largest electricity producer, sank 2.7 percent to 5.45 yuan. The company said Oct. 16 profit may have dropped more than 80 percent in the first nine months. Shenzhen Energy Group Co., which supplies power to cities in the southern Guangdong province, fell 2.8 percent to 7.40 yuan.

Anhui Conch fell 4.3 percent to 17.60 yuan. Third-quarter profit rose 13 percent to 704.3 million yuan, the company said. UBS AG cut its price estimate on the stock by 56 percent to 23.9 yuan, citing weakening demand. Tangshan Jidong Cement Co. fell 1.1 percent to 5.54 yuan, while Huaxin Cement Co. dropped 2.4 percent to 9.65 yuan.

``We think the softening demand is more severe than previously assumed and hence have turned more cautious on the cement price outlook,'' Shanghai-based UBS AG analyst Mick Mi wrote in a note today.

The Shanghai Composite Index, a measure of stocks on the larger of China's two exchanges, fell 1.7 percent to 1,924.53. The Shenzhen Composite Index dropped 1.6 percent to 511.05.

The following stocks also rose or fell in China. Stock symbols are in parentheses after company names:

China Shipping Development Co. (600026 CH), the nation's largest oil carrier, gained 0.08 yuan, or 1.1 percent, to 7.70 yuan, after third-quarter profit rose 28 percent to 1.54 billion yuan, lifted by the country's rising imports of crude.

Western Mining Co. (601168 CH), China's fourth-largest producer of zinc concentrate, declined 0.22 yuan, or 3.4 percent, to 6.35. The company reported a 32 percent decline in third- quarter profit to 282.8 million yuan on weaker demand and lower metals prices.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net