By Wang Lan (China Daily)
Updated: 2008-03-05 10:16

Sharp falls in banking and financial stocks dragged down yesterday's lead indicator by more than 2 percent.

The Shanghai Composite Index fell 2.32 percent, or 102.82 points, to close at 4335.45. The smaller Shenzhen Component Index dropped 2.73 percent to end at 15746.23 points.

Turnover on the Shanghai bourse totaled 137 billion yuan, up 8.3 percent from the previous trading day, while that on the Shenzhen Stock Exchange reached 66.6 billion yuan.

Analysts said investor confidence has remained vulnerable to uncertainties overhanging the market, including further monetary tightening measures to combat inflation and more new share issue plans by publicly listed companies.

Banking and financial stocks led yesterday's price drop. All of 15 bank stocks traded fell yesterday, with the Shenzhen Development Bank plummeting 9.85 percent to close at 29.75 yuan and Shanghai Pudong Development Bank sinking 8.99 percent to close at 38.98 yuan. Ten of the 11 securities stocks also saw big falls, with CITIC Securities slumping 4.71 percent to 62.45 yuan and Guoyuan Securities Co in Anhui province sliding 4.53 percent to 28.43 yuan.

Mao Nan, an analyst at Orient Securities in Shanghai, said poor performance in other stock markets in Asia has exacerbated investor worries about global economic problems highlighted by the US subprime mortgage crisis and escalating oil and other commodity prices.

Under these circumstances, investors are particularly sensitive to any bearish factors, real or imagined, Mao said. "Investors seemed unnecessarily jittery about the conversion of non-tradable shares to tradable ones, when the market is lacking upward momentum," Mao said.

With a batch of companies planning to convert their non-tradable shares to tradable ones, there is rising concern among investors that the oversupply of scrips could further tighten liquidity in the market, analysts said.

"The increased share supply resulting from the conversion has heightened investor worries about market performance in the coming months," Zhang Xiaojun, an analyst at CITIC China Securities in Beijing, said.

But the bearish sentiment was not shared by all investors. Some traders and analysts said stock prices have already fallen to bargain levels in some sectors.