"A lack of follow-through buying after the recent market rally made share prices move narrowly for the entire session," said a Shanghai Securities analyst.

Shanghai's B-share index fell 1.31 percent to 123.523 points. Shenzhen's fell 0.96 percent to 201.30. Hard currency B shares are open to foreigners and Chinese.

The fall deepened after the morning's slight drop as some investors took profits in loss-making companies which outperformed the market in a technical rebound this month, brokers said.

"Profit-taking in loss makers depressed share indices this morning," said an analyst with China Securities.

"But we expect little potential for the indices to fall sharply in the near term as investors are still cherishing hopes the markets will go up further after the recent rally."

Despite this morning's fall, share prices have risen 10 percent this month in a rebound triggered by hopes that the government will come to the rescue of markets which have fallen more than 40 percent since their peak in 2001.

Chicken breeder Shanghai Dajiang Group, which lost money in 2000 and 2001, led B shares in volume and was one of the heaviest fallers, dropping 4.41 percent to 48 US cents with a heavy 9.07 million shares changing hands.

The stock is still up 17 percent since the start of 2003 because speculators bought heavily in loss-making firms during the recent market bounce. Dajiang will post 2002 results on April 26.

Officials at the China Securities Regulatory Commission have said they are not aware of any immanent change in policy.

Analysts said they expect share indices to move in a narrow range with trading volume falling ahead of the Lunar New Year, or Spring Festival, China's most important public holiday. Exchanges will be closed from January 30 to February 7 to celebrate the festival.

"The latest rebound seems to have lost steam," said a Jinxin Securities analyst.

"We expect the markets to see range-bound trade in the last few trading days ahead of the Spring Festival."

The benchmark Shanghai composite index, which groups B shares and yuan-denominated A shares open to Chinese and select foreign investors, was likely to see support at 1,430 points, with an upside limit at 1,500 points, analysts said.

The index closed down 0.68 per cent at 1,450.616 points.

Shanghai's A-share index finished 0.67 percent lower at 1,515.787 points and its Shenzhen's counterpart was 0.93 percent down at 437.37.

Glass maker CSG Technology Co was the biggest decliner on the A-share markets, falling 6.72 percent to 10.82 yuan (US$1.31) after having gained a whopping 34 per cent this year due to speculative buying, brokers said.

(China Daily January 24, 2003)