China's shares weakened yesterday to close at a four-month low as investors sold stocks in companies expected to post weak first-half results.

The benchmark Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, fell 0.49 percent to 1,470.393 points, the lowest close since March 26, when it finished at 1,456.271.

Shenzhen's sub-index lost 0.39 percent to finish at 3,263.61.

Shanghai's hard-currency denominated B-share index shed 0.26 percent to finish at 112.159 points, while its equivalent in Shenzhen edged 0.32 percent lower to 227.74.

"Sellers dominated the market today, indicating share prices still have potential to fall further," said analyst An Junyong at Tiantong Securities.

Analysts said they expected the index to find support at the key 1,450-point level.

CITIC Securities, the only Chinese brokerage which has floated shares, was one of the top decliners and most active counters, ending 4.2 percent lower at 7.27 yuan (US$0.87) on heavy volume of 9.54 million shares.

Brokers said investors were worried about CITIC's results after newspapers said last week China's brokerages were likely to see a second difficult year in 2003 due to persistent stock market weakness.

CITIC Securities, which is scheduled to unveil first-half results on August 15, posted an 82.5 percent plunge in 2002 net profit.

The Shanghai composite index has fallen 4.5 percent since mid-July due to a series of negative factors including a rash of planned stock offers and lingering worries over a government crackdown on stock improprieties.

Car spare parts maker Lingyun Industrial Co Ltd said yesterday it would launch an A-share initial public offering on Thursday after a slew of similar announcements last week.

Major garment maker Beijing Zhongyan Co was also one of the worst performers yesterday, ending down 5.04 percent at 8.47 yuan (US$1.02) after reporting in mid-July a net loss for the first half of this year.

On the foreign exchange market, China's yuan ended a shade weaker to close at 8.2776 to the dollar yesterday, but still kept at the higher end of its tightly-managed trading range.

The yuan traded between 8.2770 and 8.2778 throughout the session, at the higher part of a band of 8.2760 to 8.2800 that the central People's Bank of China (PBOC) usually enforces.

Turnover was US$340 million, up from US$270 million on Friday.

PBOC Governor Zhou Xiaochuan was quoted in media reports yesterday as saying China must maintain a stable yuan to protect ordinary people.

The remark, on which Zhou did not elaborate, highlighted the government's deep-seated worries about the economic fallout from a possible revaluation requested by Chna's export competitors.

China has been facing increasing pressure from the United States, South Korea and Japan to revalue its currency, which they say is pegged at too low a level against the dollar.

The yuan weakened yesterday to 6.9494 against 100 Japanese yen from 6.9455 and softened versus the euro to 9.4944 from 9.4900. It also lost ground versus the Hong Kong dollar to 1.0613.

Shanghai copper futures climbed yesterday, in line with the general trend on the London Metal Exchange which rose to its highest point since early March on Friday, traders said.

The most active December 2003 contract gained 100 yuan (US$12) to 17,850 yuan (US$2,155) per ton, while other contracts ended 70 yuan (US$8.4) to 120 yuan (US$14.5) higher. Combined volume fell to an active 88,536 lots from Friday's 96,692 lots.

"Chinese investors looked to the LME for direction, though market mood was a bit cautious as they were watching to see if the London market could maintain its gains," said a Shanghai trader.

(China Daily July 29, 2003)