Shanghai's composite index shed 2.618 points, or 0.2 percent, to 1,332.061, while Shenzhen's sub-index dipped 3.96 points, or 0.15 percent, to 2,718.33.

Shanghai's hard currency B-share index closed up 0.28 percent at 115.212 points. Shenzhen's fell 0.12 percent to 188.85. B shares are open to Chinese and foreign investors.

Dajiang, which was in the red for the first nine months of last year as well as in 2000 and 2001, led B shares in volume and was Shanghai's biggest decliner, ending down 0.71 percent at 42 US cents on volume of 3.8 million shares.

The markets' decline came after China's shares rose nearly two per cent on Monday in a technical bounce.

"The rebound lost momentum quickly as market sentiment was still weak," said Shenyin & Wanguo Securities analyst Simon Lai.

"We expect markets to continue trending down in the near term."

Analysts said trade was slack as many investors awaited news of possible fresh stimulative policies. Market sources said Shang Fulin, appointed China's top regulator last month, is touring bourses for the first time in his new official capacity.

"The trips are aimed at obtaining first-hand information about the markets," said one securities industry source. "There was no immediate word about amendments to stock policies."

Shang, the former head of the Agricultural Bank of China with 20 years of banking experience, was appointed chairman of the China Securities Regulatory Commission in late December.

"Investors kept on the sidelines today as they waited to see whether Shang would initiate some steps to help stabilize the markets," said Hu Zhiguang, an analyst at China Securities.

The benchmark Shanghai composite index is hovering at a three-and-a-half-year low, having fallen 41 per cent from a peak in June 2001 due to a slew of negative factors, including weak corporate earnings and frequent initial public offerings (IPOs).

A much-heralded IPO by CITIC Securities, the first brokerage to go public on the Chinese mainland, rose a mere 11.3 percent on its first day of trade on Monday, a poor showing by Chinese standards.

The shares fell 3.19 percent to 4.85 yuan (58 US cents) yesterday, hurt by weak markets and the firm's slumping profits, brokers said.

On the foreign exchange market, China's yuan closed one notch firmer at 8.2767 against the US dollar yesterday as exporters sold hard currency earned during the robust foreign trade season in December, dealers said.

The yuan moved in a tight band, hitting an intra-day high of 8.2766 and low of 8.2768. Turnover rose to an active US$670 million from Monday's US$540 million.

(China Daily January 8, 2003)