Chinese shares fall 1.35 percent by midday

Chinese share prices fell 1.35 percent by midday Friday led by banks, which lost ground as fears of a slowing economy outweighed strong first-half earnings forecasts from lenders, dealers said.

A slowdown in first half Chinese export growth added to the negative sentiment. Official data published Thursday showed China's trade surplus fell nearly 12 percent in the first half of 2008, traders said.

The benchmark Shanghai Composite Index, which covers both A and B shares, shed 38.84 points to end the morning at 2,836.62.

Banks led the market drop despite several major lenders posting strong earning forecasts.

"Concerns over a slowdown in economic growth and still-high inflation are driving investors to head for the sidelines," Chen Huiqin at Huatai Securities told Dow Jones Newswires.

But aluminium companies bucked the trend, turning sharply higher after aluminium prices hit a record high in London overnight.

Aluminum Corp. of China (Chalco), the country's top aluminium producer, rose 2.43 percent to 14.36 yuan.

The Shanghai A-share index was down 40.84 points, or 1.35 percent, to 2,975.29 points, while the Shenzhen A-share index shed 16.16 points, or 1.77 percent, to 896.12.

(Agencies)