Investors edgy waiting for plenum's new details

Investors apparently weren't inspired by the news from the Third Plenary Session of the 18th Communist Party of China Central Committee, with the benchmark index sliding on Wednesday as market participants awaited documents that might shed further light on the authorities' economic plans.

The Shanghai Composite Index shed 1.83 percent to 2,087.94, falling below the psychologically important 2,100 level. Turnover rose moderately to 73.4 billion yuan ($12 billion) from 68 billion yuan on Tuesday.

Banks and utilities led the way down. The big four State-owned banks' shares all declined about 1 percent.

SDIC Power Holdings, a thermal electric and hydroelectric power generator controlled by China's State Development & Investment Corp, fell 5.12 percent.

However, shares related to national security, the military and information security gained.

A communique released after the plenum ended on Tuesday said that China will establish a State security committee, improving systems and strategies to ensure national security.

Aerosun Corp, a military equipment supplier, surged by the 10 percent daily limit.

Analysts said the lack of bold statements in key fields including State-owned enterprise reform, and the absence of any change in the family planning policy or the hukou (urban residence) system, may have let the market down.

But investors are still waiting for a much longer "decision" document, usually issued a week after such meetings, for more indications about the leadership's blueprint for reform.

Other Asian markets were also lower on Wednesday. Hong Kong's Hang Seng sank 1.3 percent to 22,605.30. Tokyo's Nikkei shed 0.4 percent to 14,537.43, and South Korea's Kospi lost 1.3 percent to 1,969.39. Australia's S&P/ASX 200 fell 1.5 percent to 5,311.40.

"As expectations on reforms were greatly raised in the past month, we are concerned that markets could be slightly disappointed," Bank of America Merrill Lynch said in a report.

Most observers said it is clear that the senior leadership wants overall deeper reforms in the economy, governance and the judiciary system, but progress will be gradual.

"Decisive results are expected by 2020. This means that the senior leadership views the reform process as a long and difficult one. One should not expect major breakthroughs in the near term," said Wang Tao, chief China economist at UBS China.

The biggest disappointment lies in SOE reforms, said Wang.

"As we had expected, and contrary to the recent market hype, SOE reform seems to have not been considered a priority by the Plenum.

"The communique used the same wording as 10 years earlier, rather than giving the non-public economy a higher position," said a research note released by UBS on Wednesday.

Some investors, however, are taking a long-term view.

"There are huge differences between China's political meetings and those in the West," said Xin Yu, president of Guangzhou-based Zequan Investment.

"It is normal that no detailed plans are announced at this stage, for example, for revamping or partially privatizing State-owned enterprises.

"But it is a convention for the authority to stay low-key in wording, while pushing for reform gradually, with some pilot programs already unfolding," he said.

"I believe that room for further declines is very limited and we will see a rebound within this week," he said, noting that sectors including environmental protection and high-speed railway construction might see considerable growth.