The Shanghai stock market fell 2.14 percent yesterday, led by the financial large-caps, amid concerns about the US credit crisis arising from the subprime mortgage woes.

Economists and analysts said investors' worries stemmed mainly from the potential risks to China's economic growth caused by the possible recession in US resulting from the credit problem, despite reassuring words from US Treasury Secretary Henry Paulson.

Reuters quoted him as saying the financial system and the US economy are strong enough to withstand the current crisis without triggering a recession.

"The concerns about the credit problems overhanging the global financial markets have, to some extent, disrupted the Chinese stock market rally," said Zhu Gang, an analyst at Changjiang Securities.

The benchmark Shanghai Composite Index dropped 104.43 points, or 2.14 percent, to close at 4765.45, with 511 out of 998 stocks closing lower. Turnover on the Shanghai bourse amounted to 129 billion yuan, down 2.4 percent from the last trading day.

Before yesterday, the benchmark index had held up well against what has been described as a "gradual meltdown" of global equities. The main indicator had risen an aggregate 2.5 percent to 4869.88 from last Friday, when ripples of the credit squeeze in the US began to spread to European and Asian markets.

"The market is conducting a short-term correction," said Zhang Fan, an analyst at Changjiang Securities. "We expect it to resume the upward trend when the impact of the US credit squeeze is digested."

The subprime issue is nothing more than an excuse for the overdue market correction, the analysts said.

"As a relatively less open market, the subprime issue is not expected to have as direct an impact on the Chinese equities market as other overseas markets," said Zhu.

Analysts said global markets would probably take months to absorb the subprime blow. But no substantial impact is expected on China's stock market, they maintained.

(China Daily August 17, 2007)