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China's shares edged up yesterday in a technical rebound a day after posting their lowest close in more than seven months, with that steep fall helping ease persistent selling pressure, brokers said.
The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, climbed 0.32 percent, or 4.623 points, to 1,449.712 points.
The index has fallen 5.8 percent since mid-July, hit by factors from a rash of stock offers to tightened bank lending.
The Shenzhen sub-index fell 0.29 percent, or 9.40 points, to close at 3,246.43 points.
"The market is experiencing a technical rebound, as investors cautiously buy shares in companies that have dropped a lot but show signs of bouncing back," said Simon Wang, an analyst at Xiangcai Securities.
Copper wire manufacturer Xinxin Industrial Co Ltd was the top A-share gainer yesterday, jumping 10 percent to finish at 8.58 yuan (US$1.03). It has climbed 13.2 percent since chalking up a record low of 7.58 yuan (91 US cents) on August 1.
Chronic loss-making chicken breeder Shanghai Dajiang Group Co Ltd was yesterday's most active B share, sliding 3.02 percent to US$0.289.
Analysts said trading had grown choppy after the Shanghai composite index dipped below the psychologically important 1,450-point level on Monday.
"The index is likely to move narrowly in the next two days amid bearish sentiment, with the downside trend keeping the index at a low level in the near future," Wang said.
The Shanghai B share index finished 0.18 percent higher at 101.072 points, while its Shenzhen counterpart dropped 3.29 percent to 222.57. Turnover in Shanghai B shares plunged 41 percent to a thin US$10.511 million.
In the foreign exchange market, China took another step yesterday to ease the upward pressure on its currency by letting local firms involved in international project contracting and labour services keep all foreign exchange earnings.
Analysts said the move, though expected to have limited impact on the yuan, highlighted the government's eagerness to take the heat off the yuan and reform the rigid currency regime.
China has recently allowed China Development Bank to issue the country's first domestic US dollar bonds and made it easier for foreign multinationals operating in the country to deal in foreign exchange.
From September 1, firms involved in the latest relaxation, including those in international shipping services, will be allowed to hold all foreign exchange income from the previous year, up from 20 percent, the State Administration of Foreign Exchange (SAFE) said.
The reason for the move was that the companies were dealing in foreign exchange more frequently than others, the administration said in a statement published on www.safe.gov.cn.
An SAFE official said Chinese project contracting and labour services firms earned some US$1.25 billion in 2002, a fraction of the overall service incomes of nearly US$40 billion.
China had a current account surplus of US$35.4 billion in 2002.
The move is seen as cooling the upward pressure on the yuan by soaking up some of the capital inflows, fuelled by strong foreign investment and a solid trade surplus.
"This is a small part of policy changes designed to reduce the supply of foreign exchange and boost demand," said Chen Xingdong, chief economist at BNP Paribas Peregrine in Beijing.
"The administration's move indicates a change from compulsory selling of foreign exchange by companies to that based on firms' own willingness."
The yuan is convertible only on the current account, but exporters must now sell most of their hard currency earnings to banks, which then trade them on the foreign exchange market.
(China Daily August 20, 2003)
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