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Stock Prices Drop Despite China's First Manned Spaceflight

China shares fell Wednesday after small investors took profits on companies seemingly linked to a space programme that saw the country becoming only the third nation to send a human into space.

The benchmark Shanghai composite index, grouping hard-currency B shares for foreigners and yuan-denominated A shares, closed down 0.37 percent at 1,383.10 points, retracing morning gains backed by buying in larger stocks. Shenzhen's fell 16.79 points, or 0.53 percent, to 3154.68.

China joined an elite club yesterday after sending a single astronaut on a 21-hour odyssey around the Earth to become the third nation to do so after the United States and the former Soviet Union.

Brokers said small investors had bought heavily into companies whose names bore the word "space" or the like in the run-up to the launch - even though virtually none of them had anything to do with yesterday's historical event.

China Spacesat Technology Co Ltd - a tour agency - was yesterday's worst performer and ended down its 10 percent daily limit at 12.34 yuan (US$1.49) after having soared almost 50 percent since late August.

"The fall of 'space' stocks right after the launch of China's first manned spaceship betrayed a strong speculative psychology among investors," said China Securities analyst Dong Bin.

Vehicle spare parts maker Shaanxi Aerospace Power Hi-tech Co Ltd dived 8.48 percent to close at 9.71 yuan (US$1.12), rival Harbin Fenghua Aerospace Hi-tech dropped 8.16 percent to 12.71 yuan (US$1.54) and mini-bus maker Beijing Aerospace Changfeng fell 6.84 percent to 7.22 yuan (87.3 US cents).

It was not clear why the companies chose to include the term "aerospace" in official company names.

Brokers said there was no immediate reaction to a statement by Swiss giant UBS that it had used up a quota of US$300 million for investment in China's main stock and debt markets, an announcement seen as positive for the market.

The Shanghai composite index is down about 15.2 percent since mid-April, versus a 40.5 percent rally in neighbouring Hong Kong over the same period, hit by negative factors from a rash of stock offers to a government-ordered tightening of bank loans.

Analysts said they expected the market to remain weak over the near term, with some saying the index could head for its year low of 1,311.684 points set on January 6.

"Investor confidence is weak as jitters over a quick market expansion linger," said Lu Wei, a trader at East Asia Securities.

A shadow continued to be cast over the market by the pending decision by China Merchants Bank shareholders about whether or not to go ahead with the issue of 10 billion yuan (US$1.21) in convertible bonds.

Despite widespread objections from minority shareholders for fear of possible dilution of existing shares, analysts said the issue scheme is likely to go through.

Despite yesterday's fall, property companies based in the southern boomtown of Shenzhen ended up sharply as investors bet that a recovery in neighbouring Hong Kong would buoy the city's real estate sector, brokers said.

Property developer Shenzhen Baoan Group Co Ltd was the star performer, jumping its 10 percent daily limit to 5.04 yuan (60.9 US cents), while Shenzhen Real Estate Co Ltd closed up 4.58 percent at 6.85 yuan (82.8 US cents).

(China Daily October 16, 2003)

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