Shanghai's hard currency B share index, having lost half of its value since a peak at the end of May 2001, closed down 3.43 percent at 116.987 points, its lowest finish since March 2, 2001.

Shenzhen's B-share market shed 1.99 percent to end at 186.43, its lowest close since March 5, 2001.

"Investors have lost confidence as they see no signs of a market recovery in the near term," said a Haitong Securities analyst.

"They just sold any old stock."

Shanghai-listed Hainan Airlines was the biggest decliner on the B share markets, diving 6.64 percent to US$0.619.

The fall followed a 9.92 percent plunge on Wednesday after Hainan Airlines announced it would list next week more than 150 million shares held by employees and founders of the firm.

Overall sentiment was soured by a Tuesday speech by China's top securities regulator, which brokers said suggested more big companies would be allowed to sell shares as authorities look to dampen speculation in smaller companies.

A liquidity squeeze due to frequent stock offers are among a slew of negative factors that have caused share prices to fall 16 percent since early September.

Turnover rose on the B share markets, available to foreign investors, on Wednesday but was still thin at US$19.04 million in Shanghai and HK$70.34 million (US$9.02 million) in Shenzhen.

Analysts said they expected further weakness in the near term, with some predicting the benchmark Shanghai composite index would test its lowest level so far this year.

"Investors are very much disappointed at the recent consecutive falls," said an analyst of Pingan Securities. "Market conditions have greatly deteriorated and the near-term trend is by no means optimistic."

The composite index, which groups B shares and domestic A shares off limits to foreign investors, closed down 2.47 percent at 1,390.629 points, breaking key support at 1,400.

It had logged an intraday low of 1,339.200 on January 29 this year and a closing low of 1,358.691 points on January 22.

On the yuan-denominated A share markets, investors sold market heavyweights. Sinopec Corp , the largest capitalized firm on mainland exchanges, closed down 2.16 percent at 3.17 yuan (US$0.382).

China United Telecommunications Corp Ltd, which accounts for nearly 2 percent of Shanghai's A share index, fell 1.69 per cent to 2.91 yuan (US$0.351).

Shanghai's A index ended down 2.45 percent at 1,453.421 points and Shenzhen's fell 3.27 percent to 415.67.

China's yuan ended flat at 8.2770 against the US dollar and dealers said they expect the Chinese currency to remain firm as exporters will sell more dollar earnings near the end of the year.

"In the near term, exporters are expected to sell more goods before the Christmas holidays and will need to settle the dollars they earned," a dealer at a foreign bank said.

The yuan's value is driven primarily by trade flows since it is fully convertible only on the current account.

(China Daily November 22, 2002)