CHINA’S main stock index tumbled to a new seven-month closing low yesterday, led by blue chips such as banks and steelmakers, because of fears of a U.S. recession following worse-than-expected U.S. employment data.

“No one knows how bad the U.S. economy is, and no one knows how badly that would impact the Chinese economy,” said Yuan Yi, analyst at Shenyin & Wanguo Securities.

“Uncertainty is now the biggest risk in the stock market. What’s certain is that profit growth at listed firms is slowing.”

The benchmark Shanghai Composite Index closed down 3.59 percent at 4,146.299 points, after hitting a low of 4,120.530.

The index’s loss deepened in the afternoon after the government reported a big drop in China’s trade surplus as export growth slowed. Many analysts attributed the drop to the timing of the Lunar New Year and short-term disruptions from fierce winter weather, but some investors saw it as a sign of the economy’s vulnerability to a U.S. recession, traders said.

The index ended for the first time below major technical support at 4,165 points, the 38.2 percent drop of its bull run from June 2005.

It bounced from near that support twice last month, but analysts do not rule out a clean break — two straight daily closes — if supply/demand conditions in the market remain poor. Such a break could prompt a slide to 4,000 points or below.

Industrial & Commercial Bank of China, the biggest lender, fell 2.99 percent to 6.17 yuan. Baoshan Iron & Steel Corp., China’s biggest listed steel company, lost 3.08 percent to 15.12 yuan.

(SD-Agencies)