Shanghai's composite index closed down 1.17 percent at 1504.403, while its Shenzhen counterpart ended 1.10 percent lower at 434.57.

Shanghai's hard currency B share index fell 1.17 percent to 130.289 points while Shenzhen's dropped 2.26 percent to 194.78.

Turnover on the hard currency B share markets, available to foreigners and Chinese investors, was only US$9.638 million in Shanghai and HK$ 61.331 million (US$8.12 million) in Shenzhen.

The Chinese Government announced a new scheme last week to allow qualified foreign institutional investors (QFII) to buy and sell A shares for the first time in December, which is meant to lift the gloom over the markets.

But instead of reassuring investors who have watched China's shares slide 30 percent in the past 17 months, the QFII news raised fears China would move quickly on other market reforms - some of which were expected to hit B share prices, analysts said.

"The QFII scheme had long been awaited and investors sold their stocks after it happened," said Sun Baowen, an analyst with the Great Wall Securities.

"Now investors are worried about when the government will announce a qualified domestic institutional investor (QDII) scheme, a move widely considered as extremely negative to the domestic B shares market," Sun added.

The QDII scheme would let Mainland Chinese, now banned from investing their US$80 billion foreign currency savings in overseas markets, to put their money into a fund that invests in foreign stocks.

Analysts said that, if allowed, most investors would prefer the Hong Kong market, where most of China's best companies are listed, and the QDII plan could cause a capital outflow from hard currency B shares.

"Also, the market is concerned a new round of fund raising activities would commence after the 16th National Congress of the Communist Party of China, from CITIC Securities for example, and cause an outflow from the secondary market," Sun said.

Financial giant CITIC Securities is expected to list A shares to raise a gross 2.76 billion yuan (US$332.5 million) in its first public offering.

In the absence of fresh news, investors sold shares in companies which have reported poor results this year.

Shenzhen-listed real estate developer China Vanke Co Ltd, which posted a drop of 20.53 percent in operating revenue during the first nine months this year, was the biggest B share decliner with a fall of 6.85 percent to HK$5.30 (US$0.702).

Port operator Jinzhou Port Co Ltd, which announced a 38.48 percent fall in the first half of 2002, was Shanghai's biggest B share decliner with a drop of 0.016 per cent.

In the futures market, Shanghai copper futures closed barely changed yesterday, mirroring range-bound trade on the London Metal Exchange.

Almost all Shanghai contracts closed between 10 yuan (US$1.2) higher and 30 yuan (US$3.6) lower, with the second most active April 2004 futures moving in a relatively wider range to end 40 yuan (US$4.8) down at 15,630 yuan (US$1,888) per ton.

Shanghai's benchmark March 2003 futures finished 10 yuan (US$1.2) lower at 15,550 yuan (US$1,873) a ton as combined volume plunged to only 33,480 lots from Friday's moderate 57,342 lots.

"The Shanghai market lost direction since the LME moved in a narrow range," said a Chinese trader. "Most investors kept on the sidelines waiting for fresh market leads."

Prices of Shanghai's spot copper rose a minor 50 yuan (US$6) to a range of 15,370 to 15,470 yuan (US$1,851.8-1,863.8) a ton yesterday, largely in line with the futures trend, traders said.

(China Daily November 12, 2002)