China's major stock index fell 3.81 percent yesterday after a spate of profit-taking by institutional investors, after the index crossed the 4500-mark during the day.

Analysts said the stock market dive was the result of a ripple effect from the plunge in Hong Kong and from profit-taking by investors after the market rose 17 percent in July. They also held that the latest policy announcements increased investors' anticipation for more measures by the government.

The Shanghai Composite Index dropped 170.47 points to close at 4300.56, with 783 out of 902 stocks closing lower. The turnover on the bourse amounted to 171.07 billion yuan. The number of new A-share accounts opened on Tuesday was 151168.

The smaller Shenzhen Composite Index also fell 3.82 percent, or 49.37 points, to close at 1241.95. The foreign-currency-denominated B-share index tumbled 5.09 percent.

"Many mutual funds began to sell their holdings when the stock market reached the key mark of 4500," said Zhong Hua, an analyst at Changjiang Securities.

Meanwhile, the Hong Kong equity market followed the Wall Street tumble. Hang Seng Index fell 729 points, or 3.15 percent, to close at 22455.

The index was hit by the tremors from the US mortgage market. The exchange drastically revised the morning ascent in the afternoon session. The index eventually settled at 22455.

Hang Seng China Enterprises Index, which mirrored the performance of mainland companies, fell 3.88 percent or 518.6 points, closing at 12845 yesterday.

Ricky Tam, chairman of Hong Kong Institution of Investors, said analysts underestimated the negative effect from the US subprime market.

(China Daily August 2, 2007)