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China's shares indices hit nearly four-month lows yesterday as another disappointing performance by China Unicom's A shares sparked broad selling, brokers said.
Shenzhen's B share index fell 1.79 percent to 217.22 points, its lowest close since June 21, while Shanghai's fell 0.72 percent to 139.018, its weakest since June 20.
Turnover on the hard currency B shares, open to foreign and Chinese investors, was a mere US$11 million in Shanghai and just HK$55 million (US$7 million) in Shenzhen, reflecting the dearth of interest in trading on such weak markets.
Yuan-denominated A shares in China United Telecommunications Corp Ltd, reserved for domestic investors, closed down 1.39 percent at 2.83 yuan (34.2 US cents) on huge volume of 203 million shares.
China's number two cellular carrier listed 55 percent of its giant 11.5 billion yuan (US$1.4 billion) A share issue in Shanghai on Wednesday.
The shares only rose 25 percent.
While that was healthy by international standards, it was mediocre for China where smaller IPOs - usually priced cheap to ensure strong subscription - sometimes triple upon listing.
"Investors had hoped the listing of China Unicom would help stabilize share prices, but instead it disappointed them with two days of poor shows," said analyst Ding Chaoyu of United Securities.
Unicom is now the lowest-priced A share, followed by market giant Sinopec Corp, which closed at 3.23 yuan (39 US cents).
Sinopec launched China's biggest domestic IPO, an 11.8 billion yuan (US$1.42 billion) offering, in August 2001. Unicom's A share issue is the second largest.
The markets showed signs of being oversold with the 14-day Relative Strength Indicator (RSI) at below the 30 oversold mark.
Indices have dropped 8.6 percent since early September due to a slew of negative factors, including frequent A share IPOs such as Unicom's offer which are putting pressure on liquidity.
Poor corporate earnings and a government crackdown on irregularities have also weighed heavily on the markets, which analysts said could continue to fall in the near term.
"Technical buying set on morning as the markets had fallen sharply over the past few weeks, but a lack of follow-through buying make the morning's rebound lose steam quickly as recent market weakness has greatly hurt investor confidence," said analyst Zhang Yongpan of Guohai Securities.
"Investors see no hopes of a market recovery in the near term, particularly as the year end is drawing near and liquidity will be tighter due to institutional settlement," said analyst Chen Dong of MF Securities.
Chinese brokerages, fund management firms and other institutional investors typically trade less in the fourth quarter of a year as they collect cash for annual settlement.
Brokers said the benchmark Shanghai composite index was likely to fall to test the psychologically important 1,500-point level in the next few days.
The index, which groups both A and B shares, ended down 4.959 points, or 0.32 percent at 1,530.407 points yesterday.
Shenzhen sub-index also edged down 25.64 points, or 0.82 percent, to 3115.62.
Shanghai's A share index fell 0.32 points to 1,597.241 and its Shenzhen counterpart was down 0.40 percent at 471.08.
(China Daily October 11, 2002)
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