China shares ended down yesterday as Shenzhen's B shares wallowed near seven-month lows due to jitters over the possibility of escalating war, after the United States and Britain launched military strikes against Afghanistan.
Shares opened up more than 1 percent as the Chinese markets restarted trading after a week-long break, but worries that political instability could weaken global economies and stock markets rapidly undercut sentiment, traders said.
Shanghai's composite index shed 38.334 points to close at 1,726.533 on slim volume of 3.3 billion yuan (US$399 million), down from 4.3 billion yuan (US$525 million) on September 28, the last trading day ahead of the country's week-long National Day holiday starting from October 1.
Shenzhen's sub-index fell 94.47 points to 3,404.16 as turnover shrank to 2.3 billion yuan (US$281 million) from the previous session's already thin 2.7 billion yuan (US$327 million).
Market in fears
"Fears of an escalated war and its economic consequences were a dominant factor for most of today's session," said a floor trader in a foreign brokerage in Shanghai.
Sentiment was already poor before markets closed last week for the holiday due to diverse factors, including uncertainty after the attacks on New York and Washington on September 11.
The Shanghai B index has fallen 10.52 percent since September 11, while the Shenzhen B index has shed 17.34 percent.
A government crackdown on market irregularities and worries that the slowing of the global economy would start to take a toll on Chinese growth, sent investors to the sidelines.
Shanghai B shares slipped 0.67 percent to 150.543 yesterday, a two-month low close since August 9, on a meager turnover of US$24.2 million. Unlike A shares which are reserved for Chinese traders, B shares are open to foreigners as well as Chinese.
The Shenzhen B-share index finished at 236.56 points, down 2.18 percent from September 28, the last trading day ahead of the holiday, and at its lowest close since March 12. Turnover was slim at HK$130.5 million (US$17 million).
"Given that the market is dominated by negative factors without supportive policies in sight, we expect further falls," said analyst Dai Yizhong of Guotai Junan Securities.
High opening
The market opened higher yesterday partly because the US military response to the terrorist attacks was largely expected and did not spook investors greatly.
There was also a mood of post-holiday cheer, analysts said.
"Chinese investors had sold heavily before the holiday due to fears over military action against Afghanistan," said Zheng Weigang, a senior analyst at Shanghai Securities.
"As the uncertainty over the form of US retaliation had caused investors to sell shares, some people are now buying after the attack that happened last night," he said.
However, buying soon slowed down as Chinese investors started to take cues from other Asian markets.
Hong Kong's blue-chip Hang Seng index closed down 3.01 percent yesterday, helping to intensify selling in China later in the session, brokers said.
The formerly insulated B shares have been tracking overseas markets, in particular Wall Street, since the attacks on the United States dealt the already weak global economy another blow.
Investors yesterday sold all sectors indiscriminately, while slides were exaggerated by paltry volumes, brokers said.
(China Daily 10/09/2001)
