Investors Lose Faith in Asia's Top Stock as Downgrades Mount

(Bloomberg) -- Investor confidence in top stock Semiconductor Manufacturing International Corp. is starting to turn, with the shares plummeting 15 percent in the wake of disappointing earnings.

The company, known as SMIC, sank the most since February 2014 in Hong Kong on Wednesday, extending a two-day rout to 19 percent. The shares had surged 95 percent from the start of September through Monday, making it the best performer on MSCI Inc.’s Asian gauge.

The rally wasn’t backed by analysts -- Credit Suisse Group AG, China Securities International Financial Holding Co. and Mizuho Securities Co. all lowered their recommendations in the past four weeks, with Credit Suisse warning shares had overshot earnings potential. Even after today’s slide, analysts project another 23 percent decline in the shares.

Gains had been spurred by optimism Liang Mong Song’s appointment last month as co-chief executive would help drive SMIC’s earnings, said Steven Liu, an analyst at China Securities. But confidence turned to worry after disappointing third-quarter earnings, he said.

Investors Lose Faith in Asia's Top Stock as Downgrades Mount

Wednesday’s rout came as Chinese shares sold off broadly amid concern about weakness in the nation’s bond and commodities markets.

There are now 11 sell recommendations on SMIC, outnumbering the 10 buy ratings. There are also eight holds, according to data compiled by Bloomberg.

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