China's shares closed at their lowest in a year Wednesday, battered by weak sentiment exacerbated by fresh selling in bank stocks on the back of a huge planned bond issue by Shanghai Pudong Development Bank, brokers said.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, dropped 1.92 percent to 1,317.792 points, the lowest close this year since the 1,319.868 level set on January 3.

The Shenzhen sub-index also fell 45.31 points, or 1.4 percent, to end at 3,182.27 points yesterday.

"Pudong Development Bank's giant bond issue dealt another blow to the already poor market sentiment," said analyst Dai Yizhong at Guotai Junan Securities.

"As investor confidence has collapsed, we can see no immediate support for the Shanghai composite index."

Pudong bank, in which the world's largest financial services company, Citigroup, has a 4.62 percent stake, said on Wednesday it plans to issue five-year convertible bonds worth 6 billion yuan (US$725 million) to help its expansion.

Pudong bank's shares skidded 4.47 percent to 8.77 yuan (US$1.10) - a 21-month low - with investors worried the bond issue will lead to a dilution of the lender's earnings over the next few years, brokers said.

Index heavyweight China Merchants Bank Co Ltd's shares have fallen 11.6 percent since August 26, when it announced a plan to issue 10 billion yuan (US$1.2 billion) in convertible bonds, the largest ever single issue of the investment tool in China.

It closed down 3.63 percent at 9.29 yuan (US$1.10), in line with falls in other bank stocks.

Minsheng Bank declined 4.51 percent to 8.26 yuan (98 US cents), Huaxia Bank lost 4.47 percent to 6.41 yuan (77 US cents) and Shenzhen Development Bank fell 2.37 percent to 7.82 yuan (94 US cents).

The Shanghai composite index has fallen 2.94 percent since the start of 2003, making China the worst performing stock market in Asia for the year.

The index provisionally ended at a year low of 1,318.656 points.

It has fallen 19 percent since mid-April, versus a rise of roughly 40 percent in neighbouring Hong Kong, after being hit by a slew of factors including too many stock offers and a government-ordered tightening of bank loans, which have thinned market funds.

In the futures market, Shanghai copper futures traded higher yesterday, following healthy gains on the London Metal Exchange which went some way to restoring confidence in a recently volatile market, traders said.

Shanghai's most active May contracts rose 210 yuan (US$25) to 21,500 yuan (US$2,597), while all other contracts finished up between 140 yuan (US$17) and 300 yuan (US$36). Volume dropped to 185,288 lots from Tuesday's considerable 274,022 lots.

"Shanghai copper was positive today on the strength of LME's overnight rise," one trader said. "I think the market is going to look good... in the future."

LME three-month copper closed Tuesday's session up a steep US$30 at US$2,073, and it continued its healthy performance in Wednesday's Asian trade to be quoted at US$2,076/2,080 a ton by 0139 GMT.

Shanghai's spot copper gained 320 yuan (US$39) to 340 yuan (US$41) to move in a range between 21,410 yuan (US$2,590) and 21,470 yuan (US$2,590) a ton yesterday.

Shanghai's aluminium futures were mixed yesterday with most contracts losing 10 yuan (US$1.2) to 80 yuan (US$9.70), while some increased by 20 yuan (US$2.40) to 150 yuan (US$18) as volume fell to 19,770 lots from 24,520 on Tuesday.

LME aluminium was quoted US$2 down from Tuesday's close at US$1,509/US$1,513 a ton in yesterday's Asian trade.

(China Daily November 13, 2003)