The government announced on Sunday it had fired two senior officials - the health minister and Beijing's mayor - from their posts of party secretaries in their departments for mishandling the SARS outbreak.

It also revealed the number of cases in the Chinese mainland was far higher than previously reported.

Shanghai's B-share index fell 2.46 percent to 125.213 points, while Shenzhen's dropped 2.64 percent to 220.41. Hard currency B shares are open to Chinese and foreign investors.

Tourist agencies and airlines bore the brunt of selling as punters expected they would be hardest hit by the SARS epidemic and the government's cancellation of a week-long May Day holiday designed to boost consumer spending.

Huangshan Tourism Development Co finished 6.22 percent lower at US$0.618. Hainan Airlines dropped 4.83 percent to US$0.709 and Shandong Airlines fell 3.32 percent to HK$3.20 (US$0.39).

Brokers and analysts who once confidently predicted an upswing in the country's share markets said yesterday the news about the deadly disease might have strangled the nascent rally.

The benchmark Shanghai composite index responded by sliding almost two percent, wiping out the previous week's gains.

"The SARS spread began to seriously affect the stock market today," said Dai Yizhong, an analyst at Guotai Junan Securities.

"The fall today has clearly terminated a recent market rally, although it's still too early to forecast a downtrend."

Stock indices are down about a third since their peak in mid-2001, persistently laid low by poor corporate earnings, a crackdown on corruption and too many share issues.

They are still up eight percent from March 26 when they began heading north on mounting evidence of China's economic boom, but some brokers said even that gain was now in danger.

Still, Asia's second largest bourse after Japan was slow to respond to a SARS outbreak that hammered shares from Hong Kong to Singapore, some of the hardest-hit countries.

But Chinese punters were now reacting with characteristic impulsiveness, brokers said. They were unloading shares in everything from tour agencies to airlines, betting that fears of the epidemic would translate into more people afraid to venture far from home.

"The impact of SARS on the stock market mainly comes from worries about China's economic growth," said Zheng Weigang, a senior analyst at Shanghai Securities. "Investors think China won't be able to repeat its strong first quarter growth."

The admission that the SARS virus was far more widespread than previously acknowledged was taking the shine off an economy that had been the envy of the region, analysts said. Its economy grew 9.9 percent year on year in the first three months of 2003.

While concrete estimates are hard to come by, some of Beijing's largest malls and restaurants have emptied, underscoring the impact on the economy, particularly since the government cancelled a week-long May Day holiday.

Tens of millions of people had been expected to travel during a "Golden Week" designed to boost consumer spending.

Stock losses could deepen if health authorities prove unable or unwilling to contain the disease's spread, spooking institutional investors which had not fled the market so far.

Although retail investors make up the bulk of daily turnover, institutions are still by far the largest holders of shares.

"We expect SARS worries to linger for some time, although the near-term trend on the market depends on developments in efforts to curb the disease," said Zheng.

(China Daily April 22, 2003)