China's shares closed at an eight-month low yesterday as investors, nervous about new share offers siphoning funds away from existing shares, punished companies that had posted poor interim results, brokers said.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, fell 0.82 percent to 1,397.54, the lowest finish since January 13, when it closed at 1,386.314.

Shenzhen Petrochemicals Co Ltd was Shenzhen's biggest B-share decliner, sliding 3.42 percent to HK$2.26 (US$0.29) after the company posted a heavy loss for the first half of 2003 after being in the red throughout 2001 and 2002.

Hainan Airlines Co Ltd, which suffered a big loss in the first six months of 2003, was Shanghai's worst B-share performer with a 2.8 percent drop to US$0.452.

The Shanghai composite index has fallen 9.2 percent over the past two months as a spate of stock offers drained liquidity. Other factors such as an official tightening of bank lending also weighed on market sentiment, brokers said.

"Consecutive share offers have dashed investor hopes of a quick market recovery," said analyst Wu Ang at CITIC Securities. "Many have chosen to flee the market."

In the latest offer, privately run transformer maker Zhixin Electric Co Ltd said yesterday it would raise 148.15 million yuan (US$17.89 million) through an A-share initial public offering this week.

Analyst Liu Benzheng at Tiantong Securities noted the Shanghai composite index had easily broken the psychologically important 1,400-point support level yesterday, indicating the market would remain weak in the near term.

Despite overall market weakness, newcomer Sanyuan Foods surged on its debut yesterday.

Beijing Sanyuan Foods Co Ltd, a unit of Hong Kong-listed Beijing Enterprises, listed its domestic IPO on the Shanghai stock exchange and soared 181 percent to 7.30 yuan (US$0.88) versus an IPO price of 2.60 yuan (US$0.31).

The dairy maker, holder of the McDonald's franchises in Beijing and booming Guangdong province, enticed investors as it was the country's first IPO offering investors access to an international fast-food franchise, brokers said.

Shanghai and Shenzhen stock exchanges will be closed from October 1 to 7 for the National Day holiday, the bourses said yesterday.

The last day of trading before the break is Tuesday, September 30, the exchanges said in statements published in official securities newspapers.

Trade on both bourses resumes on October 8.

On the foreign exchange market, China's yuan softened versus the US dollar to 8.2774, at the stronger end of its managed trading range.

The yuan moves in a band of 8.2760 to 8.2800 enforced by the central bank.

Turnover came to US$460 million from $450 million on Friday.

The yuan firmed yesterday to 7.0422 against 100 Japanese yen from 7.0656, but softened versus the euro to 9.3350 from 9.2530.

In the futures market, Shanghai copper futures ended mixed yesterday as Chinese investors awaited clearer leads from the London Metal Exchange, traders said.

The most active January contract ended 20 yuan (US$2.4) lower at 18,210 yuan (US$2,199) a ton, while others closed 40 yuan (US$4.8) higher to 80 yuan (US$9.6) lower. Combined volume fell to 58,216 lots from Friday's active 71,846 lots.

"Chinese investors feel that the LME is still undergoing consolidation, and are looking for clearer trends to emerge," said a Shanghai trader.

LME three-month copper closed US$20 lower at US$1,796 a ton on Friday on weak US retail sales, but recovered to US$1,804/1,807 in yesterday's Asian trade, helped by some Chinese short-covering, traders said.

Spot copper in Shanghai ended 40 yuan (US$4.8) higher to trade in a range of 18,400 yuan to 18,500 yuan (US$2,222-2,234) yesterday.

(China Daily September 16, 2003)