By Wang Lan (China Daily)
Updated: 2008-03-25 09:30

Massive unloading of blue-chip stocks by institutional investors yesterday brought the lead indicator down 4.49 percent, the largest one-day drop since January 28.

The benchmark Shanghai Composite Index fell 170.39 points to close at 3626.19, with 707 stocks closing lower than the previous trading day. Turnover on the Shanghai bourse totaled 97.6 billion yuan ($13.84 billion), down 8.04 percent from last Friday.

The smaller Shenzhen Component Index also dropped 4.52 percent to 13098.24 points, with turnover amounting to 42 billion yuan, down 10.1 percent from the previous trading day.

Analysts attributed the poor market performance to a "fundamental shift" in the way investors, especially institutions, evaluate stocks. In the past, investors bought largely on growth expectations. Now, as economic uncertainties loom large, they are looking more closely at the underlying value of individual stocks.

"The market is no longer bullish and investors are getting increasingly jittery due to the high valuations of many leading stocks compared with those in other markets," Zhang Xiaojun, an analyst at CITIC China Securities in Beijing, said.

Other analysts said many funds companies are selling down their portfolios to raise cash in preparation for a possible increase in redemptions by investors.

"We worried the possible increasing redemption rate would further weigh down the big-cap stocks in coming weeks," Li Yanlin, an analyst at Industrial Securities, said.

Many analysts and traders said the market would continue its downward trend, with occasional spikes, in the coming weeks.

"We don't see much space for the market to regain lost ground, unless there's bullish news strong enough to lift market sentiment," Zhang said.

Large-caps yesterday dropped sharply, with banking and financial stocks the hardest hit. Ping An Insurance fell to the limit at one point before recovering to close at 50.56 yuan apiece, down 9.81 percent. Shanghai Pudong Development Bank fell to the daily allowable limit of 10 percent to 30.85 yuan. Industrial Bank plummeted 9.37 percent to end at 31.83 yuan, while China Pacific Insurance Co fell 6.58 percent to 30.66 yuan.