China's shares tumbled yesterday as investors sold large-capitalization stocks, including market giant Sinopec Corp, after more plans to float State-held shares were unveiled, brokers said.

Shanghai's composite index fell 35.425 points to close at 1,903.446 as turnover soared to 7.9 billion yuan (US$954 million) from 6.2 billion yuan (US$752 million) on Monday.

Shenzhen's sub-index lost 53.59 points to end at 4,010.86 as volume climbed to 4.7 billion yuan (US$567 million) from 3.7 billion yuan (US$447 million) a day earlier.

Sinopec Corp's A shares, reserved for Chinese investors, dropped below its initial public offering price of 4.22 yuan (US$0.508) for the first time since listing on August 8.

The stock, the most actively traded of the day, fell 2.36 percent to 4.14 yuan (US$0.49) on huge volumes of 78.14 million shares.

"News of more plans to sell State-owned shares led to worries over possible liquidity outflow from the stock market," said analyst Hu Zhiguang of China Securities. "Although this was a negative factor mainly for A share markets, pessimism spilled to B shares as well."

The Shanghai B-share index ended at 165.303 points, down 1.71 per cent. Turnover dropped to US$118.8 million from an already thin US$134.7 million on Tuesday.

Shenzhen B shares slid 0.89 per cent to 284.93 as turnover fell to HK$505.89 million (US$67 million) from HK$629.69 million (US$83 million).

The US Federal Reserve's overnight cut in the interest rat, which analysts expect China to soon follow, provided little cheer even though lower interest rates typically drive more funds into the B-share market.

"The cut was unable to help the market as overall sentiment is very weak," said analyst Guo Chunyan of Huatai Securities.

Media reports said yesterday that Shenzhen-listed A-share firm Tianjin Genius Co will become the first Chinese listed company to sell State shares with an additional A share offering.

Investors were worried that the listing of billions of State shares via additional share issues was more than the sagging market could handle.

Most Chinese listed companies are still controlled by the State. Untradeable shares held by the government and other institutions account for two thirds of China's stock market capitalization of nearly US$600 billion.

The government first announced the plans to sell State shares in June.

Brokers said the government's determination to carry through plans to sell the huge amounts of State shares, despite a month-long slide in stock prices, triggered worries over its attitude toward the stock markets.

From 1998 to 2000, when the central government wanted the stock market to go up, it often slowed market expansion or delayed measures that might depress share prices during a downward trend, said a broker at Shenyin & Wanguo Securities.

"But things seem different this year," he said. "The central government is apparently allowing share prices to fall to squeeze out bubbles after heavy gains in the past few years."

Share prices began a sharp downturn July 20 when news spread that authorities were investigating bank money being illegally used for stock speculation. Shanghai's B-share index is down 15.30 percent and Shenzhen's has fallen 5.74 percent since then.

(China Daily 08/23/2001)