Stock offer helps curb enthusiasm

By Zhang Fengming  |   2008-8-5  |     NEWSPAPER EDITION

SHARES in Shanghai slumped yesterday over concerns that the stock offer by China's biggest maker of rail vehicles will absorb too much capital and an expected policy change by the Chinese central bank did not happen.

The benchmark Shanghai Composite Index, which tracks both yuan-denominated A shares and US-dollar-backed B shares, tumbled 2.14 percent, or 60.08 points, to 2,741.46 yesterday.

Losers outnumbered gainers 692 to 127 while nine companies were unchanged.

China South Locomotive & Rolling Stock Corp will offer as many as 3 billion new shares, or a 26-percent stake, in Shanghai at 2.10 yuan to 2.18 yuan each to raise up to 6.54 billion yuan (US$954 million), the company said yesterday in a filing to the Shanghai Stock Exchange.

Today, offers will be open to retail investors who can bid from 2.18 yuan and more a share.

The sale will test the demand for Chinese stock offerings which has been inactive for months. The Shanghai index lost 46.1 percent in the first half, spurring the regulator to slow shares sale approvals to keep the market stable.

"The new shares sale and the lack of a solid policy boost, as had been expected, led to the market drop," said Wan Bin, a GF Securities Co analyst. "The market has yet to bottom out and investors should wait for the rebound."

Wang Antian, a Sealand Securities analyst, shared the view, saying a solid policy is needed for a market turnaround.

It had been expected that the central bank would move to add more lending quotas to small and medium companies yesterday, but this did not happen, which dampened investment enthusiasm.

All the financial players dropped yesterday except Huaxia Bank, which rose 1.73 percent to 11.79 yuan. Brokers are in the front line to suffer in a correcting stock market.

Haitong Securities fell 5.01 percent to 22.92 yuan. While Citic Securities shrank by 4.72 percent to 22.41 yuan.