Shares in Shanghai fell Tuesday for the second consecutive session after reports said Shenzhen's trading board for small- and medium-sized firms would start operations soon, raising concerns of a capital outflow from the main board.

The Shanghai Composite Index, which tracks both yuan-denominated A shares and hard-currency B shares, shed 2.08 percent to 1,518.05. The A-share Index dropped 2.10 percent to 1,591.74 and the B-share Index lost 1.22 percent to 103.49.

"Some investors sold shares to switch to the special board in Shenzhen on expectations of a higher return from the initial trading," Sun Chao, an analyst with Citic Securities Co, said. "This action will continue to dampen the market in the next few days."

The Shenzhen Stock Exchange, which got approval from the securities regulator last Monday to set up an independent board for small- and medium-sized firms, is due to hold a ceremony tomorrow marking the official start of the board, the Shanghai Securities News reported Tuesday, without citing any sources. The first initial public offering on the board would be launched soon, according to the report.

Baoshan Iron and Steel Co, the country's largest steelmaker, declined 1.72 percent to 6.29 yuan (75.78 US cents) and China Petroleum and Chemical Corp, the country's biggest oil refiner, lost 1.61 percent to 4.88 yuan. China United Telecommunications Corp, the listed unit of the country's second-largest cell-phone carrier, fell 1.27 percent to 3.90 yuan.

Zhejiang Guangsha Co, a property developer, fell by the 10 percent daily ceiling limit to 4.47 yuan.

(eastday.com May 26, 2004)