Chinese shares ended lower yesterday as a pledge by regulators to support the securities sector failed to boost sentiment and a shortage of funds weighed on the market.

Analysts said a speech by China Securities Regulatory Commission Chairman Shang Fulin, published in yesterday's newspapers, lacked concrete steps to ensure a strong, immediate rebound in the weak market.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, closed 0.81 percent lower at 1,386.653 points after opening higher.

Analysts said the index declined as it pierced, but failed to stay above key resistance at 1,400 points.

The Shenzhen market shed 28.76 to close at 3,187.06.

Shanghai's hard currency B shares lost 0.89 to 105.52. Shenzhen's B-shares went down 4.21 to 254.39.

"Regulators should resolve some of the capital market's structural problems to protect investors' rights and allow for the stable and healthy development of the markets," Shang was quoted as saying in the Shanghai Securities News.

He said China had pledged to regulate and develop the Shanghai and Shenzhen bourses and promote the launch of a NASDAQ-style second board, but no timeframe was given.

"We believe share prices will rise in the near term, buoyed by increased signs of policy support to the stock market," said stock trader Lu Wei at East Asia Securities. "But the upside potential will be capped by a shortage of funds in the market."

China's leaders vowed to forge ahead with reforms, including further development of capital markets, at a recent Communist Party meeting, according to a document published in official newspapers on Wednesday.

Shang reiterated yesterday support to the development of equity and commodities futures markets.

The debt market will be expanded to become a major channel to increase direct fund raising from the markets, while institutional investors will be encouraged to become main players in China's securities sector, he said.

China's second-largest copper firm, Jiangxi Copper Co Ltd, outperformed the market yesterday, rising 1.07 percent to 5.68 yuan (US$0.69).

The firm said on Tuesday its earnings per share surged 220 percent to 0.14 yuan (1.7 US cents) in the first three quarters compared with the year-earlier period as sales rose.

Profit-taking emerged in steel and auto stocks, which had led Wednesday's 2.47 percent gain in the index.

Index heavyweight Baoshan Iron and Steel Co Ltd, the listed arm of China's largest steel maker and one of the most active counters, dropped 1.19 percent to 5.80 yuan (US$0.7).

A shares of Shanghai Automotive Co Ltd, which surged 6.04 percent on Wednesday, dropped 1.12 percent to 12.33 yuan (US$1.49).

"The regulator's support policy is too vague. The market hopes for more detailed measures to boost investor confidence," said analyst Zhang Qi at Haitong Securities.

The Shanghai composite index has shed 15 percent since April, hit by a rash of stock offers and a tightening of bank loans, analysts said.

Analysts predicted the index to move between 1,350 points and 1,450 in the near term.

"The downside potential is limited due to increased signs of policy support to the stock market," said analyst Xu Ming at Shenyin & Wanguo Securities.

On the forex market, China's yuan ended unchanged versus the US dollar at 8.2766, near the stronger end of its managed trading range.

Turnover rose to a heavy US$960 million from Wednesday's US$950 million. The yuan weakened to 7.5880 against 100 Japanese yen from 7.5547 and softened versus the euro to 9.7780 from 9.6785.

(China Daily October 24, 2003)