Chinese shares fell to their lowest in more than seven months yesterday as investors stuck to the sidelines amid persistent weak trading sentiment, brokers said.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, finished down 0.68 percent at 1,415.693 points, its lowest finish since January 13.

The index has shed 8.03 percent over the past six weeks, battered by a rash of stock offers and a government tightening of bank loans.

The Shenzhen sub-index also fell 25.53 points, or 0.80 percent to close at 3,155.53 points yesterday.

Worries of a liquidity crunch heightened this week after the central bank announced a hike in bank reserves on Saturday, analysts said.

High-tech firm Chengdu Unionfriend Network Co Ltd was the second biggest decliner in Shenzhen, with a 5.22 percent fall to 8.54 yuan (US$1.03) after saying on Wednesday it planned to issue an additional 40 million A shares.

"The indices were pulled down by a widespread fall in share prices that suggested further losses ahead," said Jinxin Securities analyst Xi Weidong.

Investor confidence has been weak, strangling liquidity, while a quickened pace of new share issues has sidelined investors, he added.

Some investors sought solace in Shandong Gold Co Ltd, which debuted on the Shanghai stock exchange as the second gold smelter to float shares in China.

Chinese property developer Lujiazui said yesterday that second-quarter profit were seven times higher than the year-ago period, riding a surge in a domestic market that is propping up property prices but worrying planners.

Chinese developers are capitalizing on booming demand from a rising middle class and overseas speculation. But the government has issued warnings against over-investment in the high-end market, while investigations into backroom deals in Shanghai threaten to cool the red-hot sector.

Average high-end residential prices in central Shanghai held steady in the second quarter at around US$2,400 per square metre, according to consulting group FPD Savills.

Yesterday's most active counter finished 124.06 percent higher at 10.71 yuan (US$1.29) versus an initial public offering price of 4.78 yuan (58 US cents), with 36.41 million shares changing hands.

The Shanghai B-share index edged down 0.62 percent to 99.292 points while its Shenzhen counterpart dipped 0.46 percent to 223.37.

In the futures market, Shanghai copper futures clambered higher yesterday despite a fall on the London Metal Exchange, though volumes were paltry as Chinese investors watched for near-term trends in overseas markets, traders said.

The most active January copper contract rose 50 yuan (US$6) to 17,750 yuan (US$2,144) a ton, while most other futures ended 20 yuan (US$2.4) to 70 yuan (US$8.4) higher. Combined volume dwindled to 29,726 lots from Wednesday's active 79,730 lots.

"Shanghai contracts are going through an adjustment phase and that's why movements are not huge. The general market mood is very cautious with investors watching how the LME will perform in the near term," said a Shanghai trader.

LME three-month copper lost US$5.50 to end at US$1,751 a ton in Wednesday's curbed trading, while the market awaited more US economic data, traders said.

Shanghai aluminium futures ended little changed, ending 10 yuan (US$1.2) to 20 yuan (US$2.4) higher, while combined volume rose to 12,756 lots from Wednesday's 8,892 lots.

(China Daily August 29, 2003)