China's share market posted a fresh eight-month closing low yesterday as a welter of new stock and bond issues continued to weigh on sentiment in the worst-performing market this year.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, finished down 1.16 percent at 1,389.822 points, its lowest close since January 13 when it ended at 1,386.314.

The Shanghai composite index has shed nearly 10 percent over the past two months, hit by an abundance of stock offers and a government-ordered tightening of bank loans. This contrasts with sharp rises in other regional markets, including Hong Kong, which has risen 16 percent over the same period.

The index breached the psychologically crucial 1,400-point support level again after a rebound the previous day fizzled out amid a rash of new stock offers, including one by Hongyuan Securities, brokers said.

The index is now seen as technically oversold with a score of 25 on the 14-day Relative Strength Index.

Baoshan Iron and Steel Co Ltd, the listed arm of China's largest steel maker, closed down 2.39 percent at 5.32 yuan.

"Fund selling has helped Baoshan's shares dive and severely battered already-weak investor confidence, pulling down the broad market," said analyst Wu Ang at Citic Securities.

A slew of stock offers drained at least US$1.6 billion from the market over the past month, analysts said, predicting further weakness in the near term.

Hongyuan Securities dropped its daily limit of 10 percent to 7.76 yuan after the small brokerage announced it planned to sell 120 million new shares next week to raise up to 609 million yuan (US$73.57 million) to shore up its capital.

The share offering comes shortly after two other financial firms, China Merchants Bank Co Ltd and Citic Securities, announced fund-raising plans.

Citic Securities closed down 0.94 percent at 7.67 yuan. The firm said on Tuesday it plans to place up to 2 billion yuan (US$241.6 million) in corporate bonds to become the first Chinese brokerage to issue bonds.

Analysts said liquidity has been even tighter after the central bank said it would raise reserve requirements to 7 percent from 6 percent, starting on September 21.

Investors also punished Merchants Bank as they worried the lender's plan to issue 10 billion yuan (US$1.2 billion) in convertible bonds would dilute earnings over coming years, brokers said.

Its A shares fell 1.27 percent to 9.36 yuan, ranking among the most active counters yesterday.

The Shanghai B-share index declined 1.21 percent to 97.796 points, while its Shenzhen counterpart edged down 0.26 percent to 225.56.

In the futures market, Shanghai copper futures closed higher in expanded trade yesterday after the London Metal Exchange broke through the US$1,800 resistance level in Asian trade.

Shanghai's most active February contract closed up 140 yuan at 18,400 yuan (US$2,223) a ton, while most others jumped 110 yuan to 170 yuan (US$13.3 to US$20.6). Combined volume surged to heavy 80,254 lots from 32,610 lots on Tuesday.

"Fresh buying by long-position holders emerged in Shanghai after the LME overcame resistance, triggering hopes of further gains in the near term," said a Chinese trader.

Flagship LME three-month copper was quoted at US$1,802/1,805 a ton by 0305 GMT in Asian trade, recovering from Tuesday's softer London kerb close at US$1,789/1,790, helped by Chinese buying, traders said.

Spot copper in Shanghai closed up 60 yuan (US$7.2) to trade in a range of 18,330 yuan to 18,380 yuan (US$2,216 to US$2,222) yesterday.

Almost all Shanghai aluminium futures finished up 10 to 20 yuan (US$1.2 to US$2.4) yesterday. Combined volume was thin at 5,618 lots, compared with Tuesday's 5,426 lots.

(China Daily September 18, 2003)