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Stock Nudges Lower, Auto Makers Favored
China's shares closed slightly lower yesterday, but investors targeted long-favoured auto stocks seen as benefiting from the booming economy, brokers said.

The benchmark Shanghai composite index slipped 0.68 per cent, or 10.352 points to 1,502.077. It has fallen more than 4 per cent since the start of last week, a six-day slide that was only interrupted on Tuesday.

The Shenzhen sub-index also fell 0.75 per cent, or 24.61 points to close at 3248.84.

Shanghai's hard currency B-shares share index nudged 0.55 per cent lower to 113.886 points while Shenzhen's climbed 0.42 per cent to 220.09. B shares are open to Chinese and foreigners.

China's biggest minivan maker, Chongqing Changan Automobile Co, which crept 1.15 per cent higher to HK$6.15 (US$0.788), was the most actively traded counter with 3.16 million shares changing hands.

Auto stocks have been a favourite since late last year, as investors bet on good prospects for selected vehicle makers alongside the booming economy.

The top gainer in Shanghai was retail firm Friendship Group Inc Co, which rose 1.21 per cent to US$0.75.

The stock was buoyed by the initial public offering in Hong Kong of its unit, Lianhua Supermarket Holdings Co Ltd, which came in at the upper end of expectations and raised net proceeds of some HK$581.25 million (US$74.5 million).

"The Lianhua IPO was better than expected, raising hopes that the scenario for further initial offerings might also improve," an analyst at Shenyin & Wanguo Securities said.

Lianhua, which runs about 2,000 outlets across China, posted a net profit of 128.14 million yuan (US$15.48 million) in the year ended December 2002, 49 per cent higher than the previous year.

But its rally failed to lift the general gloom in markets as traders and analysts speculated that fresh restrictions, which would squeeze liquidity, might emerge from an ongoing probe into the dealings of embattled Shanghai tycoon Zhou Zhengyi.

In yuan-denominated A shares, China's second-largest cellular operator, China Unicom Ltd, was the most heavily traded counter, with 89.6 million shares changing hands. The stock closed less than 1 per cent lower at 3.24 yuan.

Shanghai's A-share index tiptoed 0.69 per cent lower to close at 1572.633 points, while Shenzhen's eased 0.87 per cent to 435.54.

China's yuan ended at its lowest closing level in a year at 8.2776 against the dollar yesterday, buoyed by rising dollar demand, dealers said.

The close was the lowest since a finish of 8.2777 on June 26, 2002. Dealers said they saw no evidence of intervention by the central People's Bank of China, which has not been active in the foreign exchange market for months.

"In a rare weakening not seen for many months, the yuan has slipped since Monday," said a domestic bank dealer. "The recent softening has been propelled by rising hard currency demand, a sign that imports are picking up."

China's central bank has enforced a wafer-thin range of 8.2760 to 8.2800 for the yuan, which is not fully convertible under the capital account and whose movements are mainly driven by trade flows.

The yuan moved narrowly between 8.2773 and 8.2776 yesterday in thin turnover of US$380 million, although that was up from US$330 million on Tuesday.

It had moved near the firm end of the government-set range over the past two years, supported by persistent trade surpluses.

The central bank reaffirmed on Monday it would keep the exchange rate stable, shrugging off calls for a revaluation from countries like the United States, Japan and South Korea.

The yuan fell to 7.0382 against 100 Japanese yen from 7.0204 on Tuesday, but firmed versus the euro to 9.5227 from 9.5567. It closed a notch stronger against the Hong Kong dollar at 1.0610.

(China Daily June 26, 2003)

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