Bourses down again on corruption crackdown
( 2001-09-04 09:20 ) (1 )

Shares on China's two bourses ended, on the whole, weak, after slow trade on Monday, succumbing to pressure from a prolonged official crackdown on stock market corruption and changes in trading rules aimed at curbing volatility.

Shanghai's composite index lost 16.95 points, to close at 1,817.19. Turnover was 4.99 billion yuan (US$603 million).

The Shenzhen market shed 32.87 points to 3,827.35. Shares valued at 2.74 billion yuan (US$331) were traded.

Only Shenzhen B shares bucked the trend, as a technical rebound helped the hard-currency index finish marginally higher.

With a lack of fresh government stimulus, investors sold shares which had outperformed the market during the downward trend over the past six weeks, including Shanghai Lujiazui Finance and Trade Zone Development Co, which ended down 1.10 per cent.

The Shanghai hard-currency B-share index ended down 0.27 per cent at 158.322 points.

Shenzhen B shares inched up 0.51 per cent.

Shanghai's A-share index closed down 0.94 per cent at 1,898.472 points.

"The markets were still under pressure of a series negative factors including the crackdown on stock irregularities," said Shao Rui, a senior analyst at Shanghai Securities.

"But downward pressure began to ease after recent falls. We expect prices to move narrowly in the near term."

Share prices have tumbled since late July, due to a central bank and finance ministry probe into an illicit use of bank funds for stock speculation, as well as a series of probes into listed firms.

On Friday, hard-currency B shares were dealt another blow, as the Shanghai and Shenzhen bourses announced they would scrap the T-0 trading rule, which allows investors to sell shares bought on the same day.

From December, trading would shift to the T-1 scheme used on the domestic A-share markets only for Chinese investors, which require them to hold shares for one day before selling.

Domestic punters enjoyed using the same-day sales to conduct speculative transactions, often triggering wild single-day swings on the B-share markets, also open to overseas investors.

Brokers said investors were closely watching how regulators would handle the case of Guangxia (Yinchuan) Industry Co, a biochemical firm in the centre of regulatory scrutiny for alleged earnings fabrication at a subsidiary.

On Saturday, Guangxia said it had sacked its president and deputy chairman, Li Youqiang.

The company, long regarded as a blue chip by Chinese investors, due to its stellar earnings record, also posted a first half loss after stripping away the subsidiary's profits.

Guangxia Shenzhen A shares were suspended for one month on August 9.

"How the central government handles the Guangxia case will offer some hints for policies towards the stock market," said Shao from Shanghai Finance. "So investors may be taking a wait-and-see attitude in the near term."

This was echoed by other analysts.

"If there are no further market-moving factors, the bellwether Shanghai B-share index is likely to move narrowly between 155 and 165 points this week," said analyst Guo Chunyan at Huatai Securities.

Shanghai Lujiazui, a property developer based in Shanghai's premier development zone of Pudong, was on Monday's volume leader, as 3.35 million shares changed hands.

Lujiazui, like many other property firms, has outperformed the market this year amid rising investor interest in property shares, partly due to a revival of China's real estate market.