China's share markets weakened slightly yesterday after a new government crackdown on financial impropriety sent investors scurrying from companies facing scrutiny by regulators.
The Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, finished 0.54 percent lower at 1,486.252 points.
Bengang Steel Plates, the listed arm of China's fifth-biggest steel maker, was the biggest B-share decliner and most active issue, shedding 3.04 percent to HK$3.19 (US$0.4).
Bengang Steel announced yesterday it was the subject of a regulatory probe for failing to report 2002 results on time.
The index has slid 3.5 percent since mid-July, hit by a tightening of bank lending after an investigation into bank loans to embattled Shanghai property tycoon Zhou Zhengyi, brokers said.
The central bank said in a monetary policy report published yesterday that it will strengthen credit supervision. This triggered concerns that investors who borrow to trade stocks might cut their buying, brokers said.
"Recent falls have weakened investor confidence and trading is in the doldrums," said Lu Wei, a trader at East Asia Securities. "But they've also eased selling pressure and that is likely to cap the downside in the near term."
Analysts said they expected the index to move narrowly between 1,450 and 1,500 points over the next few days.
Yesterday, weak sentiment also drove investors to take profits in index heavyweights, which had surged this year due to strong results on the back of robust economic growth.
Baoshan Iron and Steel, the listed arm of China's biggest steel maker Shanghai Baosteel Corp, closed down 1.24 percent at 5.57 yuan (US$0.67).
Baosteel's A shares are up 35 percent from the start of 2003 as first-half earnings soared 183 percent on the year, helped by a flurry of purchases from the auto and construction sectors.
Shanghai's B-share index fell 0.38 percent to 111.131 points and Shenzhen's slipped 0.43 percent to 234.44.
On the foreign exchange market, China's yuan closed a touch stronger at 8.2773 to the dollar yesterday, sticking to the firmer side of its tightly managed trading range.
The yuan kept between 8.2772 and 8.2775 throughout the session. The central People's Bank of China usually enforces a trading band of 8.2760 to 8.2800. Turnovers fell to a thin US$300 million from US$490 million on Tuesday.
On Tuesday, China's top economic official, Premier Wen Jiabao, defended the yuan policy, saying it was good for China and the global economy.
The yuan weakened yesterday to 6.8999 against 100 Japanese yen from 6.8711, and softened versus the euro to 9.4439 from 9.4026. But it firmed versus the Hong Kong dollar to 1.0609 from 1.0611.
Shanghai copper futures climbed yesterday in slack volume, tracking a slight rise on the London Metal Exchange, traders said.
The most active December 2003 contract ended 80 yuan (US$9.7) higher at 17,900 yuan (US$2,162) a ton, while other contracts rose 30 yuan (US$3.6) to 80 yuan (US$9.7). Combined volume slid to a slow 39,742 lots from Tuesday's moderate 58,196 lots.
LME three-month copper posted a small US$2 rise to end Tuesday's close at US$1,770, consolidating recent gains, traders said.
(China Daily August 7, 2003)
