The benchmark Shanghai composite index, which groups B shares and domestic A shares, fell below the psychologically important 1,375 point level in afternoon trade, sparking a bout of selling by retail punters cutting their losses, traders said.

Shanghai's hard currency B-share index dropped 3.12 percent to 112.999 points and Shenzhen's fell 1.68 percent to 185.52.

Both markets had risen briefly in the previous two trading days but ended at their lowest closing levels since March 2001.

"Since the composite broke the 1,375 psychological support level, lots of selling occurred in the afternoon session," said Changjiang Securities analyst Wu Zhaohui.

"Punters were really worried and tried to escape the market by selling more shares to stop losing more money," he said, adding that a breach of support level would usually be followed by a further drop.

The Shanghai composite fell 1.95 percent to 1,371.167, its lowest since January 2002. The index has been on a virtually relentless decline since June 24 and is down about 20 percent, hurting investor confidence in the near-term outlook.

Analysts said market talk of planned listings by Huaxia Bank, CITIC Securities and China Southern Airlines triggered concerns of a new round of IPOs squeezing liquidity.

"Such news, no matter how soon they will be realized, had a negative impact on the market," said Great Wall Securities Sun Baowen.

Weak third quarter earnings logged by many listed companies also weighed on investors, brokers said.

Shanghai-based Rubber Belt Co, a chemical and rubber products maker which posted a drop of 32 percent in net profit in the first half of 2002, was the biggest decliner on Shanghai's B share market with a fall of 6.62 per cent to US$0.87.

Changchun North China Wuhuan Co Ltd, said yesterday it was expecting a full-year loss in 2002, which would be its third consecutive year in the red.

The firm's A shares will be delisted if it fails to turn in profits in the first half of 2003. Its shares, under Special Treatment (ST) trading curbs, fell 5 percent to 3.94 yuan (US$0.475).

"Delisting worries influenced most ST firms in the market today," Changjiang's Wu said.

ST stocks belong to companies that have posted two consecutive years of losses. They can only rise or fall 5 per cent daily compared to 10 percent for ordinary shares.

ST Guangdong Sunrise Holdings Co Ltd was the biggest decliner in Shenzhen with a drop of 4.85 percent to HK$2.16 (US$0.286).

On the futures market, Shanghai copper futures ticked slightly lower in moderate trade yesterday as investors took to the sidelines ahead of the release of key economic data and a public holiday in the United States, traders said.

(China Daily November 27, 2002)