Chinese shares fell for a second day Thursday, as the Shanghai Composite Index dropped 0.78 percent in the wake of the overnight Wall Street decline.

The benchmark index closed down 34.46 points at 4,383.39, the lowest closing since early August last year, after trading between 4,368.30 and 4,487.32.

The Shenzhen Component Index slumped 270.00 points, or 1.67 percent, to 15,857.71.

Overnight, the Dow Jones Industrial Average dropped 0.30 percent to 12,442.83 after the U.S. economy expanded at a much weaker than expected annual rate of 0.6 percent in the fourth quarter of 2007 and despite a 50 basis points cut in federal funds rate.

Losses led gains by 737 to 96 in Shanghai and by 575 to 73 in Shenzhen. Aggregate turnover shrank to 113.6 billion (15.8 billion U.S. dollars) from 138.6 billion yuan on Wednesday.

Smalls caps dragged down the index, but gains in blue chips cushioned the decline, according to Beijing Shoufang Investment Consulting. It added the shares were unlikely to make a strong rebound in the short term as investors remained cautious ahead of the upcoming Lunar New Year holiday.

Agricultural and coal stocks led the slump. Cofco Xinjiang Tunhe Co. plunged by the ten percent daily limit to 24.53 yuan after rising 6.07 percent on Wednesday. Yanzhou Coal Mining Co. tumbled 9.63 percent to 19.61 yuan.

Major blue chips made modest rebounds after recent heavy losses. PetroChina, which accounts for one quarter of the Shanghai Composite Index, jumped 3.35 percent to 25.27 yuan.

Industrial and Commercial Bank of China rose 1.08 percent to 6.53 yuan and Citic Securities gained 3.23 percent to 68.12 yuan. China Life edged up 0.43 percent to 39.40 yuan. Baoshan Iron and Steel rose 2.78 percent to 15.52 yuan and China Vanke was up 1.76 percent to 26.05 yuan.

(Xinhua News Agency January 31, 2008)