Telecom stocks drag down Shanghai index

Shanghai stocks dropped yesterday, led by China United Telecommunications.

The benchmark Shanghai Composite Index closed down 1.93 percent at 3369.913 points, off a low of 3341.739.

Turnover in Shanghai A shares shrank to one-week low of 59 billion yuan from Tuesday's 69.2 billion.

China United Telecommuni-cations, the most active share in Shanghai, sank 8.86 percent to 8.74 yuan after falling 1.54 percent on Tuesday in an initial response to its affiliate China Unicom's restructuring announcement.

Further drops yesterday in Hong Kong-listed Chinese telecom shares, which had risen in anticipation of this week's restructuring news and were now being hit hard by profit-taking, weighed on the sector in Shanghai.

"The long-term outlook for Unicom is good but the condition of the market is so fragile, and the imbalance between supply and demand for shares continues," said Qian Xiangjing, analyst at CITIC-Kington Securities.

The market is nervous about the approach of a huge planned IPO by China State Construction Engineering Corp, which may be approved by the securities regulator today, increasing the supply of shares.

"Investors find it very hard to select shares in this market -seemingly good news becomes negative in 24 hours and stocks then pull back sharply. Unicom is a good example," said Li Shiming, analyst at Xiangcai Securities.

China United Telecommuni-cations initially opened up its 10 percent daily limit on Tuesday but began falling almost at once. This experience disillusioned investors and encouraged them to stay out of the market as a whole, Li said.

HSI 1.04% lower

Hong Kong stocks fell 1 percent in volatile trade yesterday, led by shares in Chinese telecom companies, oil producer CNOOC and coal stocks.

China Unicom dropped 4.3 percent to HK$15.2 and China Netcom fell 3.4 percent to HK$22.8.

Offshore oil producer CNOOC fell 4.1 percent to HK$13.26 after global crude oil prices fell below $124 a barrel, extending losses triggered by a rallying dollar.

The Hang Seng Index fell 252.51 points to 24123.25. Turnover on the main board fell to HK$78.91 billion from Tuesday's HK$83.9 billion.

The China Enterprises Index of top locally listed Chinese stocks gave up 1.7 percent, led by coal stocks after Yanzhou Coal said its home province of Shandong had cut prices of some thermal coal for the next three months.

Agencies

(China Daily 06/05/2008 page15)