China shares rose slightly yesterday, helped by speculative buying in poor earners such as Shandong Airlines Co Ltd, brokers said.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, closed 0.01 percent higher at 1,425.362 points.

The index has shed 7.5 percent over the past six weeks, hit by a wave of negative factors such as a tightening of bank loans. Shenzhen sub-index also fell 0.23 percent to close at 3,181.06 points.

"Trading has become very sluggish after prolonged market weakness," said analyst Zhang Qi at Haitong Securities.

Shandong Air's B shares were one of yesterday's biggest gainers with a 1.05 percent rise to HK$2.88 (US$0.37) after the company posted a first-half net loss, blaming the SARS outbreak that kept potential travelers at home.

Wingsung Data Technology Co, which had been in the red since 2001, was the top B-share gainer, jumping 5.1 percent to US$0.433.

Chinese investors often speculate in shares of loss makers, whose cheaper share prices and potential for government-orchestrated bailouts attract punters hoping for an easy windfall.

"Strength in loss makers would have limited impact on the recovery of a bearish market," Zhang said.

A wave of negative factors has deterred an inflow of fresh liquidity, keeping the market weak, brokers said.

The central People's Bank of China announced on Saturday it would raise bank reserve requirements to 7 percent from 6, aggravating a liquidity crunch.

The Shanghai B-share index edged up 0.01 percent to 99.916 points while its Shenzhen counterpart fell 0.51 percent to 224.40.

China's yuan ended one notch weaker versus the US dollar at 8.2770 yesterday, at the stronger end of its managed trading range.

The one-year non-deliverable dollar forward (NDF) discount versus the yuan was traded at a high of 1,540 points. It closed at 1,520 on Tuesday, implying a price of 8.1260 per dollar in a year's time.

NDFs are a transaction where a forward price is agreed between a customer and a bank, but settlement on the value date is undertaken entirely in US dollars.

One-year implied yuan volatility was traded at 4.00/4.75 percent yesterday.

Implied volatility is a measure of how much the options market expects the price of the underlying asset to move during the life of the option. Volatilities are often traded actively and independently.

Yesterday's turnover fell to a moderate US$540 million from US$900 million on Tuesday. The yuan firmed to 7.0387 against 100 Japanese yen from 7.0410, but softened versus the euro to 8.9922 from 8.9756.

The central People's Bank of China conducted weekly open market operations on Tuesday. It issued seven-day repurchase agreements to inject 60 billion yuan (US$7.25 billion) into the market, while selling 10 billion yuan in three-month bills.

In the futures market, Shanghai copper futures tracked the London Metal Exchange to fall sharply yesterday as LME inter-office trade took a further beating, traders said.

The most active January copper contract lost a steep 240 yuan to 17,700 yuan (US$2,137) a ton, while other futures ended 170 yuan to 250 yuan lower. Combined volume rose 79,730 lots from Tuesday's 40,618 lots.

"Shanghai's contracts were depressed by heavy falls on the LME, which extended losses in inter-office trade," said a Shanghai trader.

LME three-month copper fell further to US$1,751/1,754 in Wednesday's Asian trade, after losing US$14.5 to US$1,756 on Tuesday as Canada's Inco said it had resumed formal talks to end a 12-week strike, traders said.

Spot copper in Shanghai dropped 140 yuan to a range of 17,620 yuan to 17,660 yuan yesterday.

(China Daily August 28, 2003)