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China's shares fell yesterday, as investors dumped stocks in loss-making telecoms companies such as Datang Telecom amid a shortfall of funds in the market, brokers said.
The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, fell 0.89 percent, or 12.367 points, to 1,369.463 points.
The index has shed 16 percent since mid-April, compared with a 36 percent rally in neighboring Hong Kong, hit by negative factors from a rash of stock offers to a government-ordered tightening of bank lending.
The Shenzhen sub-index dropped by 0.35 percent, or 11.03 points, to 3174.51 points.
Datang Telecom Technology Ltd dropped by its 10 percent daily limit to 9.09 yuan (US$1.1) after the telecom gear maker posted a widened loss for the third quarter versus the same period of 2002.
Institutional investors started to cash out of such underperformers as they typically need to prepare for year-end settlement starting late October, squeezing liquidity in a depressed market already lacking funds, analysts said.
"There are signs that institutions have already begun to liquidate shares to prepare funds for year-end settlement," said analyst Hu Zhiguang at China Securities.
"We expect a shortage of liquidity to continue to last, and share prices to remain weak in the near term."
Analysts said they expected the Shanghai index to fall in the near term to test the year's low of 1,311.684 points, set on January 6.
"The recent pledge by regulators to promote the launch of a NASDAQ-style second board also helped drain money from tech stocks," said analyst Zhang Qi at Haitong Securities.
Both Yangtze Communications Industry Group Co Ltd and Fiberhome Telecommunication Technologies Co Ltd fell their 10 percent daily limits to 9.09 yuan (US$1.1) and 9.36 yuan (US$1.13) respectively.
A shortage of liquidity is likely to worsen in the near term as the market is suffering under the weight of too many recent IPOs, analysts noted.
Swelling the pipeline, Yangtze Electric Power Corp - an arm of the Three Gorges hydropower project - is expected to issue a prospectus on Tuesday for a delayed but much anticipated initial public offer, sources close to the deal said yesterday.
Yangtze Electric Power Corp will issue a share prospectus on Tuesday detailing plans to raise a gross 10.5 billion yuan (US$1.27 billion) via 2.5 billion shares at 4.20 yuan each, sources said.
Yangtze Electric had planned to issue shares in September to help fund China's massive US$25 billion Three Gorges Dam undertaking.
But China's fourth largest offering of yuan-denominated shares, was delayed in September due to pressure from regulators worried about the weight of too many stock offers on the market.
China's yuan ended two notches stronger versus the US dollar at 8.2767 yesterday, near the stronger end of its managed trading range.
China's central bank will keep the yuan exchange rate stable, saying yesterday that the fixed currency rate is good for its economy as well that of Asia and the rest of the world.
A stable yuan "is beneficial to China's economic operation, and also is in line with the demands of economic development in the Asia-Pacific region and the entire world," the People's Bank of China said in a quarterly report.
The central bank also said it would deepen its study of how to "perfect the renminbi exchange rate formation mechanism," its official jargon for liberalizing controls over the yuan, which is pegged at about 8.28 to the US dollar.
(China Daily October 28, 2003)
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