Shanghai index slumps as turnover plunges

By Lydia Chen  |   2008-8-13  |     ONLINE EDITION

SHANGHAI'S key stock index dropped in the morning session today with turnover plunging to a 21-month low on concern the bear market will deepen and as investors focused on the nation's Olympic gold medal tally in Beijing.

The Shanghai Composite Index lost 2.54 percent, or 62.51 points, to 2,394.69 at 11:30am.

Losers in the Shanghai market outnumbered gainers 755 to 62 while 11 were unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was down 2.38 percent, or 16.52 points, to 677.77.

The two markets have fallen since the Beijing Olympics started on Friday. The value of stocks traded on the two primary exchanges yesterday fell 79 percent below the levels when they hit a record on October 16.

Interest in the market has waned as government measures to combat inflation eroded profits while share gains faltered amid concern that an over-supply of new shares will overwhelm demand.

Datong Coal Industry Co, a unit of China's second-largest producer of the fuel, had its biggest three-day drop in Shanghai trading since listing in June 2006.

The shares declined 9.97 percent to 17.33 yuan (US$2.53). It tumbled the 10 percent daily limit in the last two trading days after resuming trading on Monday following a three-week suspension. Datong's nearly 30 percent three-day plunge was its steepest since the company's initial public offering in June 2006.

The Shanxi province-based company said on Monday it plans to transfer a stake worth 2.5 billion yuan to its parent in exchange for a coal mine and processing plant. Parent Datong Coal Mine Group will receive 120 million shares valued at 22.08 yuan each.

Steel makers reversed yesterday's gains and contributed to the market's morning slump.

Baoshan Iron & Steel Co, the country's biggest steel maker, lost 2.81 percent to 6.91 yuan while Xinjiang Bayi Iron & Steel Co declined 6.13 percent to finish the session at 7.65 yuan.