The Shanghai composite index, grouping A and B shares, closed down 5.678 points, or 0.36 percent, at 1,552.561 points yesterday.

Shenzhen's hard-currency B-share index ended down 0.44 percent at 207.84 points in thin trade while Shanghai's inched up 0.02 to 135.071.

Turnover on the B-share markets was tiny at US$10.97 million in Shanghai and HK$69.46 million (US$8.9 million) in Shenzhen.

Share prices have risen since Friday, mainly because brokerages and mutual funds were buying ahead of the 16th Communist Party Congress due to start tomorrow, brokers said.

"The past few days of gains were nothing more than a technical rebound," said analyst Zhong Jingteng of Ping'an Securities. "While market sentiment remained wary, investors took profits today. We expect limited gains in the near term."

Before the rebound, China's shares had slipped nearly 10 percent since early September, hit by a raft of worries ranging from low liquidity and an official crackdown on corruption to a long list of companies waiting to go public.

Yesterday, domestic A shares in Sinopec Corp, which are off-limits to foreigners, closed down 0.88 percent at 3.36 yuan on profit-taking.

Large caps had outperformed in the latest rally because of their low prices, which retail investors can afford more readily.

Sinopec, the largest-capitalized company on the mainland bourses, was the second lowest-priced A share.

Another market heavyweight, cellular carrier China United Telecommunications Corp, was the lowest-priced A share and fell 0.33 percent.

Shanghai's A-share index closed down 0.37 percent at 1,621.68 points and its Shenzhen counterpart fell 0.53 percent to 477.14.

Analysts said they still expect share prices to stage a moderate rally during the Congress, at which the Party's top leaders are expected to hand the reins to a new generation.

"The latest market rebound came ahead of the 16th Party Congress," said analyst Cui Haiping of Beijing Securities.

"Despite some volatility, markets are still likely to rise slightly in the near term," she said.

The benchmark Shanghai composite index is likely to rise 2 percent to 3 percent to about 1,600 points as regulators encourage institutional investors to "create a good market atmosphere" for the Congress, brokers said.

(China Daily November 7, 2002)