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China's shares ended down yesterday as news of an additional offering by Tangshan Steel Co soured already weak market sentiment.
Shanghai's composite index fell 6.95 points, or 0.45 percent, to 1,524.73 while Shenzhen's sub-index dipped 3.49 points, or 0.11 per cent, to 3,114.86.
Shenzhen's B-share index ended down 0.45 percent at 217.68 points while Shanghai's fell 0.53 percent to 138.79 points. Both are the lowest closing levels since June 20.
The Shenzhen-listed steel maker Tangshan said in a prospectus yesterday it plans to raise around 1 billion yuan (US$120 million) through the additional A-share issue, reserved for Chinese investors, to upgrade its technology.
Brokers said news of the large share offer triggered renewed worries about market liquidity already squeezed by a number of domestic A-share initial public offerings this year.
"With more share issues looming and the reporting season for earnings through three quarters coming, we expect the market to continue to fall," said analyst Xi Weidong of Jinxin Securities.
"The benchmark Shanghai composite index is expected to fall to test the psychologically important 1,500 level in the next few days," he said.
But Tangshan Steel's A shares closed up 0.45 percent at 6.75 yuan (81 US cents) as investors believed the fundraising would benefit the company, brokers said.
Share indices have dropped almost 9 percent since September 3 due to a slew of negative factors which included the quick pace of new share offers, poor corporate earnings and a government crackdown on market irregularities.
China's listed companies are required to report their unaudited first three-quarter results in October and most companies have yet to publish them.
Jitters over earnings persuaded investors to sell stocks in companies which had reported poor results for the first half of this year, brokers said.
Shenzhen-listed washing machine maker Little Swan Co, which posted a 82 percent fall in its first-half net profit, was the biggest B-share faller and ended down 2.58per cent at HK$4.53 (60 US cents).
On the foreign exchange market, China's yuan held steady to close at 8.2767 against the US dollar yesterday after clinging to a three-notch range in brisk trade, dealers said.
The yuan opened a notch weaker than Monday's close, reaching an intra-day high against the dollar of 8.2766 before easing back to 8.2767, near the strong end of the 8.2760 and 8.2800 band the central bank enforces.
Turnover was fairly active at US$570 million yesterday, though down from Monday's US$640 million.
"Trade was pretty active today," said a dealer at a state-owned bank in Beijing. "But I can't see it getting out of the band."
China keeps a tight rein on the yuan, saying a stable currency is key to its macroeconomic policy.
Dealers said they expected the yuan to stay strong near 8.2770 due to China's rosy trade surplus situation.
Newspapers said yesterday China's exports rose 19.4 percent year on year in the first nine months of 2002 to US$232.56 billion, adding strength to the country's trade-driven currency.
The yuan's value is driven primarily by external trade flows since it is fully convertible only on the current account.
Domestic exporters are required to sell most of their hard currency earnings to commercial banks designated to trade on the national forex market.
Officials have promised to widen the yuan's band gradually to cope with increasing flows of trade and foreign investment since China joined the World Trade Organization in November, but have given no details or timetable.
(China Daily October 16, 2002)
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