Shanghai's key stock index fell in the morning session as developers suffered huge losses after two major real estate firms reported earning declines in the third quarter.

The Shanghai Composite Index lost 2.87 percent, or 49.43 points, to 1,673.92 points at 11:30am.

Losers outnumbered gainers 724 to 80 while 23 did not change.

The Shenzhen Composite Index, which tracks the smaller domestic market, was down 2.08 percent, or 9.86 points, to 463.13 points in the morning session.

China Vanke Co. and Poly Real Estate Group Co., the country's two largest real estate developers by market value, slumped after both reported that third-quarter earnings declined as demand for homes weakened.

Vanke shares fell 9.18 percent to 5.34 yuan (78 US cents), bringing its loss to 69 percent this year. Poly dropped 4.83 percent to 12.60 yuan. The stock has fallen 60 percent in 2008.

Vanke's third-quarter profit fell 13.4 percent to 215 million yuan amid a housing market "recession." Property sales fell 32 percent to 11.5 billion yuan, according to a company filing yesterday after the market closed. The Shenzhen-based builder said it may miss its full-year profit growth target of 15 percent, and cut its new construction target by 17 percent.

Poly Real Estate, based in Guangzhou, said yesterday third-quarter profit fell 18 percent and apartment sales declined 28 percent.

Financial stocks in the banking and insurance sectors also had a tough morning.

China Life Insurance Co., the nation's biggest insurer, tumbled 8.97 percent to 17.45 yuan as third-quarter earnings fell 70 percent on lower investment returns. Ping An Insurance (Group) Co. lost 4.65 percent to 19.90 yuan. The second-largest insurer in China had a third-quarter loss of 7.8 billion yuan after an impairment charge from its investment in Fortis and slumping stocks at home hurt returns. Third-quarter profit last year more than quadrupled to 3.6 billion yuan. Full-year profit will drop "significantly," it said yesterday.

Industrial & Commercial Bank, the country's largest lender and the second-biggest component in the market, fell 7.57 percent to 3.42 yuan, after profit for the third quarter rose 26 percent to 28.2 billion yuan. Earnings grew at less than half the pace of the first six months.

Elsewhere, China Railway Group Ltd., Asia's biggest construction company said a subsidiary won a 5.06 billion yuan contract to build segments of the Shijiazhuang-Wuhan railway project. Its subsidiary, China Railway Euju Co., also won a 552 million yuan contract to reclaim land in Putian City. China Railway shed 6.72 percent to 4.30 yuan.

China Oilfield Services Ltd., a unit of the nation's third-biggest oil producer, denied it invested in Australian dollar-denominated assets. It also said it did not trade related foreign exchange derivatives. The company made the statement in response to a rumor that it suffered foreign exchange losses, it said. China Oilfield plunged 4.78 percent to 8.56 yuan.

(Shanghai Daily October 28, 2008)