The benchmark Shanghai composite index, which tracks A and B shares, dropped 1.99 percent to 1,460.795 points, its lowest close since January. Shenzhen's sub-index fell 1.46 percent to 2,971 points.

Shanghai's hard currency B share index fell 1.86 percent to 122.919 points and Shenzhen's dropped 1.77 percent to 187.75.

Both were the lowest closing levels since March 2001.

Turnover in Shanghai's B shares, available to foreign and domestic investors, fell to US$9.279 million from Wednesday's US$16 million.

"Since today's lowest point broke the 1,470 psychological support level, lots of selling occurred in the afternoon session," Great Wall Securities analyst Sun Baowen said.

Traders said the transition of power to a younger generation at the 16th Communist Party Congress in Beijing could prove positive for the markets.

Analysts said investors held out hope that a new regime might initiate pro-market policies, but persistent poor sentiment would put pressure on the markets in the short term.

"Several recently issued small-cap stocks, such as Hangzhou Sunyard, rebounded in the afternoon session, but no other buying followed to support the market," Sun said.

Analysts said telecommunications shares, which outperformed the market during the previous session, dropped sharply on profit taking.

"The market is more likely to keep the bearish trends in the short term, testing the new support 1,450 level, as institutional investors might have to sell more stocks for liquidation before the end of year," said one analyst, who declined to be identified.

Shanghai Highly (Group) Co Ltd, an air-conditioner maker, was the biggest decliner in Shanghai with a fall of 3.83 percent to US$0.653.

High-tech material manufacturer China Fangda Group Co Ltd, which posted a loss of 64.38 million yuan (US$7.75 million) in the first nine months of this year, was the biggest decliner in Shenzhen, falling 5.62 percent at HK$3.36 (US$0.445).

(China Daily November 15, 2002)