Punters shrugged off news that regulators had granted approval to the first foreign firms to trade in the massive yuan-denominated A share and bond markets, analysts said.

"The news had long been anticipated. Punters have already digested it," said analyst Shao Rui at Shanghai Securities.

"But in the long run we expect foreign investors to influence the way domestic punters choose stocks, driving them to focus more on performance and financial fundamentals," said analyst Chen Aixue at Chang Xin Fund Co.

UBS AG and Nomura Securities were the first to win approval to trade formerly off-limits A shares - which rival Hong Kong as Asia's second biggest market - under a Qualified Foreign Institutional Investor scheme launched late last year.

They are expected to invest the minimum of US$50 million initially in domestic shares, newspapers reported.

Other brokers said the government might also be trying to revive market sentiment weakened by SARS fears.

"But investors were cautious and we saw profit-taking in market heavyweights emerge," said Wu Xiaochun, an analyst at Huatai Securities.

Shanghai's hard currency B share index edged up 0.11 percent, or 0.126 points, to 116.809 points while Shenzhen's inched up 0.58 percent, or 1.28 points, to finish at 223.00.

The benchmark Shanghai composite index, grouping A and B shares, dipped 0.07 percent, or 1.171 points, to close at 1,568.341 points, while the Shenzhen sub-index also dropped 0.41 percent, or 14.51 points, to end at 3488.86 points.

Livzon Pharmaceutical Co topped the B share decliner list in Shenzhen with a 0.79 percent fall to HK$5.00 (64 US cents). It has gained nearly 20 percent since mid-March due to the outbreak of Severe Acute Respiratory Syndrome.

Also losing ground were shares in large capitalized firms such as Sinopec Corp and China United Telecommunications Corp due to profit-taking, analysts said.

Sinopec dropped 1.5 percent to 3.88 yuan (46.9 US cents) and China Unicom fell 0.9 percent to 3.24 yuan (39.1 US cents). A shares in both firms have gained more than 20 percent since early this year.

The yuan-denominated Shanghai A share index edged down 0.08 percent to 1,642.461 while its counterpart tiptoed up 0.26 percent to 460.53.

China's yuan ended two notches firmer at 8.2769 against the US dollar yesterday, remaining firm within a government-set trading band due to ample dollar supply on the market, dealers said.

The yuan moved narrowly between 8.2768 and 8.2770 after closing at 8.2771 on Monday, near the firm side of a tiny range of 8.2760 to 8.2800 set by the central People's Bank of China.

Turnover was thin at US$460 million, but up from Monday's US$340 million.

"Dollar oversupply on the market remained the dominant factor," said a domestic bank dealer.

"We expect the yuan to maintain its strength and move around 8.2770 over the near term."

The yuan has stayed on the strong side of the government-set range over the past year due to China's trade surplus, which ensured a steady dollar inflow.

It weakened to 7.0810 to 100 Japanese yen from 7.0751 and softened against the euro to 9.7978 from 9.7797. It closed two notches lower against the Hong Kong dollar at 1.0612.

(China Daily May 28, 2003)