Domestic Stocks Fall after Alert of Mobile Shares

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Last updated at: (Beijing Time) Tuesday, June 11, 2002

Domestic Stocks Fall after Alert of Mobile Shares

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China's stocks fell Monday after a regulatory probe into mobile phone maker China Kejian Co was made and the announcement of another domestic initial public offering (IPO) depressed sentiments after last week's rebound.

Shanghai's composite index tumbled 12.277 points, or 0.80 per cent, to 1,517.230, while Shenzhen's sub-index shed 14.61 points, or 0.47 per cent, to finish at 3,068.69.

Shanghai's B-share index closed down 0.71 per cent at 138.793 points while Shenzhen's fell 0.43 per cent to 211.51. Turnover was tiny at US$6.57 million on the Shanghai B-share market and HK$28.41 million (US$3.76 million) in Shenzhen.

Kejian's A shares, off limits to foreigners, fell 5.29 per cent to become yesterday's second biggest A-share decliner after the company said it was being investigated by the stock market regulator for failing to disclose information on loan guarantees.

The news dampened trading interest, already lacklustre due to liquidity fears amid a string of new IPOs.

Refined aluminium producer Henan Zhongfu Industry Co said yesterday it would sell 50 million A shares this week to raise 415 million yuan (US$50 million) for expansion and technical upgrades.

"The Kejian probe and the IPO had a negative impact on share indices today as an official clean-up campaign and a quick market expansion remain investors' key concerns," said analyst Yang Hui at Haitong Securities.

Indices have been largely weak over the past year due partly to a government crackdown on market irregularities and a constant stream of A-share offerings.

Prices rebounded late last week after regulators said they would help stabilize markets by slowing the pace of additional share offerings and encouraging institutional investors such as insurance firms into the market.

Although the rebound lost steam yesterday, analysts said the indices were unlikely to fall sharply again but would move narrowly in the near term.

"There were no signs of dumping while share indices were falling today," said analyst Xi Weidong of Jinxin Securities.

"Expectations of continued government support to the stock market are likely to cap the potential for indices to fall further," he said.

Shenzhen Properties Co was the biggest B-share faller and closed down 2.79 per cent at HK$3.48 (US$0.46) on thin volume of 101,500 shares.

The firm, as with other small capitalized stocks, is often a target of speculation because the shares tend to be volatile and offer more profit potential, brokers said.

On the foreign exchange market, China's yuan ended one notch firmer against the US dollar yesterday at 8.2769 due to lighter dollar bids from commercial banks as demand from domestic importers waned, dealers said.

"Trade was not active and the yuan trod water around 8.2770 almost throughout the session," said a Chinese dealer in Shanghai.

The yuan, fully convertible only on the current account, has been solid against the dollar this year as China garnered a trade surplus of US$8.25 billion in the first four months.

The yuan's value is mainly driven by China's trade flows as banks adjust their forex positions against the yuan on the Shanghai-based national market after exchanging hard currencies with domestic importers and exporters.

Dealers said the yuan was expected to hover around 8.2770 in the short term, near the firm end of its tiny band of 8.2760 to 8.2800 which the central People's Bank of China generally enforces.

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