China's benchmark stock index closed unchanged yesterday as a technical rebound a day earlier lost steam and a recent fall eased selling pressure, preventing share prices dropping further, brokers said.

Investors ditched stocks in firms expected to post poor interim results such as the nation's largest carrier, China Southern Airlines, brokers said.

The Shanghai composite index, grouping hard currency B shares for foreigners and yuan-denominated A shares, finished flat at 1,494.312 points.

Despite Monday's weak rebound, the index is still down 3 percent from mid-July due to factors including stock offers and a clampdown on bank loans that illegally flow into the markets, a potential drain on market liquidity.

"The market is now caught in a dilemma - it can neither rise nor fall sharply," said analyst Pei Xiaoyan at United Securities.

China Southern, also traded in Hong Kong and New York, saw its mainland A shares slip 0.5 percent to 4.01 yuan (48 US cents) as a heavy 25.18 million shares changed hands, making it the day's most active counter.

The index heavyweight said on Monday it was likely to post a loss for the first half of 2003 after the outbreak of SARS and the war in Iraq hit its bottom line. The airline is due to report results on August 29.

Analysts said the Shanghai composite index is likely to move between 1,450 and 1,500 points in the near term.

"Weak market conditions are likely to keep trading in the doldrums," said Huatai Securities analyst Wang Xiaojun.

Shenzhen's B share index fell 0.35 percent to 235.44 points and Shanghai's slipped 0.46 percent to 111.551, led by a drop in loss-making Tianjin Marine Shipping Co.

Tianjin Marine, which operates offshore marine shipping via the northern Chinese port, was the worst B share performer and closed down 4.21 percent at US$0.41 after the company announced it was being investigated by regulators for failing to report its 2002 results on time.

Tianjin Marine published its 2002 annual report in late June, a two-month delay from an April 30 deadline and it posted a heavy loss for the year.

On the foreign exchange market, China's yuan closed a notch firmer at 8.2774 to the dollar yesterday, at the firmer end of its tightly managed trading range.

The yuan traded between 8.2773 and 8.2776 throughout the session. The central People's Bank of China usually enforces a trading band of 8.2760 to 8.2800. Turnover rose to US$490 million from a thin US$380 million yuan on Monday.

Dealers said the yuan, which is not fully convertible under the current account, was supported by China's strong exports, which hit US$190.3 billion in the first half of 2003, up 34 percent from a year earlier.

The yuan firmed yesterday to 6.8711 against 100 Japanese yen from 6.8959, but eased versus the euro to 9.4026 from 9.3221.

It closed unchanged to the Hong Kong dollar at 1.0611.

Shanghai copper futures ended lower yesterday but its decline was moderate as the London Metal Exchange recouped some losses in inter-office trade, traders said.

The most active December 2003 contract finished 70 yuan (US$8.50) lower at 17,820 yuan (US$2,152) a ton, while other contracts ended 50 yuan (US$6.04) to 120 yuan (US$14.50) lower. Combined volume rose to a moderate 58,196 lots from 53,750 lots.

Spot copper in Shanghai fell 40-60 yuan (US$4.80-7.20) to a range of 17,660 yuan (US$2,132.90) to 17,700 yuan (US$2,137.70) yesterday.

Almost all Shanghai aluminium futures ended 20 to 40 yuan (US$2.40-4.80) lower yesterday, ignoring a probe on the LME's aluminium contract, traders said. Volume fell to a paltry 6,078 lots from Friday's thin 10,946 lots.

LME aluminium closed Monday's kerb trade down US$15 at US$1,437.

(China Daily August 6, 2003)