China shares closed on a down note yesterday on worries the government may tighten market supervision and that a plan to allow brokerages to raise money by issuing bonds may founder.
The Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, slid 0.91 percent to 1,465.827 points.
A seminar for brokerage executives organized this week by the China Securities Regulatory Commission (CSRC) to discuss stock market reforms and regulations could lead to the market being put on a tighter leash, some analysts said.
"The meeting could result in a renewed crackdown on market irregularities. That uncertainty has acted to push the market down," said analyst Zhang Jun at Guotai Jun'an Securities.
The government is also considering a plan to let cash-strapped securities houses issue bonds, helping them expand capital, the official Securities Times said yesterday.
"There's a risk in these bonds as they are not as safe as, say, government bonds, so it is not certain who would buy them," said analyst Elaine Wu at China Southern Securities. "But they could help relieve capital shortages in the long term."
A spokeswoman for the CSRC said there was no timetable for when brokerages would be allowed to issue bonds, but confirmed the plan was being considered.
Pharmaceutical producers Yantai Hualian Development led the Shanghai A-share market lower yesterday, closing down 4.91 percent at 6.39 yuan (US$0.77) after saying it would sell 13 million yuan (US$1.57 million) in assets in a bid to return to profitability.
But bus operator Jiangxi Changyun, which listed on July 16, closed up 5.53 percent at 11.84 yuan (US$1.43), outperformed the broad market and becoming one of the day's top performers.
The Shenzhen B-share index ended down 0.75 percent at 232.34, while its Shanghai counterpart closed 0.96 percent lower at 107.744.
On the foreign exchange market, China's yuan ended flat at 8.2770 to the dollar yesterday, close to the firm side of its tightly managed range.
The yuan kept between 8.2770 and 8.2772 throughout the session. The central People's Bank of China enforces a trading range of 8.2760 to 8.2800.
Dealers said the yuan, which is not fully convertible under the current account, was supported by China's strong exports, which hit US$228.41 billion during the first seven months of this year, up 33.4 percent from a year earlier.
Alarmed by such growth, Japan, the United States and South Korea have urged China to let the yuan appreciate. But China has dismissed such a move.
The yuan firmed yesterday to 6.9480 against 100 Japanese yen from 6.9680 and strengthened versus the euro to 9.3150 from 9.3993. It was flat versus the Hong Kong dollar at 1.0609.
Shanghai copper futures declined in active trade yesterday, but falls were more subdued than on the London Metal Exchange, traders said.
The most active December 2003 contract fell 60 yuan (US$7.3) to 17,660 yuan (US$2,133) a ton, while other contracts lost 40 yuan (US$4.8) to 80 yuan (US$9.7) by the close. Combined volume rose to 73,346 lots from a thin 50,954 lots.
The falls in Shanghai were less stark than on the LME as domestic contracts had lagged behind the London market's recent rallies, traders said.
LME three-month copper dropped US$27 to US$1,739 a ton by Tuesday's close on speculative fund liquidation, they said, with some expecting the contract to stabilize between US$1,720 and US$1,740 in the near term.
Copper in Shanghai traded 30-40 yuan (US$3.6-4.8) lower at a range of 17,500 yuan (US$2,116) to 17,550 yuan (US$2,122), tracking futures.
(China Daily August 14, 2003)
