SHANGHAI: The mainland stock market fell 1.84 percent yesterday, led by banks and insurance companies, following news of the earthquake in Sichuan province and the announcement of a rise in banks' reserve requirement ratio.

The benchmark Shanghai Composite Index also tumbled 66.74 points to close at 3560.24, although 491 of the 914 stocks closed higher. The Shenzhen Component Index fell 0.7 percent, or 91.87 points, to close at 13074.23.

Turnover on the two bourses totaled 187 billion yuan, up 9.3 percent from Monday.

The total capitalization was down 1.4 percent to 23.26 trillion yuan.

Analysts said investors reacted more calmly than they had predicted to the news of the quake and the reserve ratio hike.

Also, the quick action of the Shanghai and Shenzhen bourses in temporarily suspending trading in 66 listed companies based in Sichuan and Chongqing helped prevent wide fluctuations in their share prices, analysts said.

The bourses failed to contact some of the firms yesterday.

But all the companies will be allowed to resume trading once they have reported the impact the earthquake has had on them.

Shares in Sichuan Panzhihua New Steel & Vanadium Co Ltd surged 6.26 percent yesterday after it announced no impact from the earthquake because of its distance from the epicenter.

Liquor producer Sichuan Luzhoulaojiao Co Ltd and Wuliangye Yibin Co Ltd also reported no adverse affects.

Insurance companies took a dive because of projected payouts on earthquake-related claims.

China Life slid 4.72 percent, while China Pacific Insurance fell 7.18 percent.

Banks also tumbled following the increase to their reserve ratio.

Shen Minggao, an economist at Citi China, said: "High reserve requirements could exacerbate the liquidity risk in the banking sector, particularly among small- and medium-sized banks."

Shares in Huaxia Bank fell 3.89 percent to close at 12.59 yuan. City banks, including Bank of Ningbo and Bank of Nanjing, each fell more than 3 percent, while Shanghai Pudong Development Bank fell 2.53 percent.

Stocks in the medical, cement and construction material sectors performed well, with investors' anticipating high consumption after the earthquake.

Medical producers Yunnan Baiyao Group Co Ltd and Anhui Fengyuan Pharmaceutical Co Ltd all surged to the daily limits.

Zhu Haibin, an analyst at Essence Securities, said: "Construction and steel companies in Sichuan and Chongqing are expected to benefit from the reconstruction work after the disaster."

(China Daily 05/14/2008 page4)