China's shares closed slightly lower yesterday amid weak market sentiment after a recent downtrend pushed investors to take quick profits in index heavyweights, brokers said.

The benchmark Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, finished 0.20 percent lower at 1,476.742 points.

The index had staged a weak technical rebound in the previous two days but is still down 4 percent since mid-July, under pressure from several negative factors, including a rash of stock offers that investors fear will drain market liquidity.

Shenzhen's sub-index rose by 0.46 percent to 3,318.42.

Shanghai's hard currency B-share index dipped by 0.53 percent to 111.843 while Shenzhen's B-share index gained 0.58 percent to finish at 229.98.

Index heavyweight China Southern Airlines Co Ltd, which is also traded in Hong Kong and New York, saw its Shanghai-listed A shares fall 0.74 percent to close at 4.05 yuan (US$0.488) after a 4.08 percent rise on Wednesday.

Baoshan Iron and Steel, the listed arm of China's largest steel maker, closed down 0.53 percent at 5.65 yuan (US$0.68) after having risen sharply since the start of last week, buoyed by strong interim results and tie-ups with top global counterparts.

"A large number of new stock offers and the bearish state of the market have hurt confidence," said Lu Wei, a trader at East Asia Securities.

"Investors cashed in gains quickly as they were uncertain of the near-term outlook," he said.

Analysts said they saw lingering weakness over the next few days, but expected the index to find support at the psychologically important 1,450-point level.

Still, investors bought shares in companies posting strong first-half results yesterday.

Chenming Paper was the most active B-share stock and one of the top performers, ending 2.8 percent up at HK$5.14 (US$0.681) after the paper maker posted yesterday a 152-percent rise year-on-year in interim net profit.

A shares of China's largest maker of dairy products, Bright Dairy, rose 0.75 percent to 13.44 yuan (US$1.62) after it unveiled a 31.41-percent rise in first-half earnings.

China's more than 1,200 listed companies are required to post their interim results before the end of August.

On the foreign exchange market, China's yuan ended flat at 8.2773 to the dollar yesterday, keeping its grip at the stronger end of its tightly managed trading range.

The yuan traded between 8.2772 and 8.2774 throughout the session. The central People's Bank of China usually enforces a trading band of 8.2760 to 8.2800.

Turnover, which hit a moderate US$460 million on Wednesday, was not immediately available.

Media reports said yesterday China may cut export tax rebates to ease upward pressure on the yuan and soothe trading partners angry over what they say is an unfair advantage given by the currency's peg to a weakening US dollar.

The measure would be a shift from an aggressive export policy in place since 1998, and has worried some analysts who said it could imperil job creation and overall economic growth.

The dollar's slide against the euro and other currencies has meant corresponding weakness in the yuan, thereby making Chinese goods cheaper. China exported US$190 billion of goods in the first half of 2003, up 34 percent from a year earlier.

The yuan strengthened yesterday to 6.8872 against 100 Japanese yen from 6.9042, and firmed versus the euro to 9.3834 from 9.4676. It also gained slightly versus the Hong Kong dollar to 1.0609 from 1.0610.

(China Daily August 1, 2003)