Shanghai stocks sank on fear of share oversupply

SHANGHAI stocks slumped in morning trading on concerns that lifting the ban on the sales of non-tradable shares may drag share prices down.

The key Shanghai Composite Index lost 1.5 percent, or 31.63 points, to 2,082.4 points. Turnover stood at 30.5 billion yuan (US$4.9 billion) by midday.

Some 8.4 billion non-tradable shares of 27 companies listed in Shanghai and Shenzhen markets will be allowed to enter into circulation this week. They are valued at 88.8 billion yuan, more than tripling the amount in the previous week.

Unlocking non-tradable shares may lead to an oversupply of shares and drag share prices down in a bear market as shareholders tend to liquidize their holdings, analysts said.

Distilleries were among the big losers. Kweichow Moutai Co, a leading producer of high-end liquor in China, lost 2.6 percent to 236.58 yuan. Sichuan Tuopai Shede Wine Co dropped 3.4 percent to 28.86 yuan. Sichuan Swellfun Co decreased 3 percent to 23.48 yuan.

Property developers also fell. China Vanke, the nation's biggest developer, dropped 1.5 percent to 8.54 yuan. Poly Real Estate, the second largest developer, shed 2.3 percent to 11.48 yuan. Gemdale Corporation fell 2.4 percent to 5.34 yuan.

Shale gas-related stocks surge after the government said it will subsidize the exploration of shale gas. Datang Huayin Electric Power Co leaped by the daily limit of 10 percent to 3.31 yuan. Zhejiang Hangmin Co rose 1.8 percent to 7.36 yuan.

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