China's shares closed lower yesterday as investors dumped loss makers amid nagging concerns about a rumoured government plan to unload huge amounts of State shares, brokers said.

The rumours were flatly refuted at a press conference on Wednesday by Ma Jiantang the deputy-secretary general of SASAC.

The benchmark Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, ended down 0.58 per cent at 1,493.451 points.

The index has moved narrowly this week after falling sharply last Friday when speculation resurfaced of an official plan to sell non-tradeable State shares in listed firms, prompting fears of a flood of new shares on the market, analysts said.

The Shenzhen sub-index also fell 26.23 points, or 0.78 per cent, to end at 3316.49 points.

"Jitters over possible government sales of State shares were among a series of negative factors which have kept the stock market in the doldrums," said analyst Zhang Qi at Haitong Securities.

Shares owned by the government or State-owned companies account for about two-thirds of the more than US$500 billion market capitalization of China's Shanghai and Shenzhen stock exchanges.

Another issue pressing on the bourses is Friday's listing by China Southern Airlines Co Ltd, the country's largest carrier, of its 2.7-billion yuan (US$326 million) A share IPO.

Although China Southern's debut had largely been factored in by share indices, analysts said it could still divert liquidity from existing shares.

Yesterday, Lianhua Fibre was the Shanghai's top B-share faller with a 4.94 per cent drop to US$0.462.

The chemical fibre maker posted a net loss for 2002 and investors expect another poor showing when it unveils interim results on August 28.

Machinery maker Shenzhen Tellus, also in the red in 2002, was Shenzhen's worst performer, closing down 3.97 per cent at HK$5.56.

But analysts said the Shanghai composite index was likely to move narrowly around the key 1,500-point level because large caps in booming domestic industries from steel and autos to banking remained strong, buoyed by the country's robust economy.

Baoshan Iron and Steel, the listed arm of China's largest steel maker, Baosteel, ended up 0.54 per cent yesterday, having surged 35 per cent since the start of 2003.

Baosteel said this week its second-quarter net profits nearly tripled on demand from the booming car and construction sectors.

China's yuan ended four notches weaker versus the US dollar at 8.2774 yesterday, but stayed strong within its managed trading range.

The yuan hit an intraday low of 8.2775 and the day's high at 8.2770, matching Wednesday's close, staying well within a razor-thin band of 8.2760 to 8.2800 that the central bank usually enforces.

Turnover was a paltry US$230 million yuan, down from US$410 million on Wednesday.

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