SHARES in Shanghai dropped to a three-week low yesterday on profit taking, concerns that supply of capital will be hit due to sales of previously non-tradable shares and news of Ping An Insurance's refinancing.
Shares of finance, real estate and electricity firms led the decline yesterday.
The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, tumbled 4.13 percent to 3,579.15, the biggest daily decrease since April 14. Losers outnumbered gainers 712 to 85 while four stocks were unchanged.
Turnover fell to 133.55 billion yuan (US$19.07 billion) from 148.30 billion yuan in the previous session.
"It's natural profit taking after a 30-percent jump from the recent bottom of 3,000 by the index," said Sheng Xin, an analyst at Qilu Securities. "The index will hover around 3,300 to 3,500 for support and will then start a second rebound," Sheng added.
Shares of insurers and financial firms fell after a report said Ping An was reviving a plan for a huge fund-raising exercise, expected to total around 40 billion yuan, on the mainland and Hong Kong.
China Life Insurance fell 8.02 percent to 33.48 yuan and Ping An Insurance plunged 8.07 percent to 62.08 yuan.
Industrial and Commercial Bank of China, the nation's biggest lender, lost 3.24 percent to 6.28 yuan. Shanghai Pudong Development Bank Co, partly owned by Citigroup Inc, plunged 7.36 percent to 29.32 yuan. Pudong Bank's 412.5 million of yuan-denominated shares will become tradable next week as a two-year lockup period expires.
Pudong Bank's two largest shareholders will be allowed to sell part of their holdings, representing 7.3 percent of total outstanding shares, from Monday, the bank said in a statement yesterday.
More bank stocks are emerging from their lock-up period, threatening to siphon funds, dealers said.
"The previous-non-tradable share sales will become more common as the lock period expires. Investors are willing to sell to gain rich returns," said Qin Hong, an analyst at Bohai Securities.
Electricity producer China Datang Corp lost 7.33 percent to 13.14 yuan.
The aviation-related sector surged as the Shanghai Securities News reported that China will set up a company, China Commercial Aircraft Co, by Sunday to develop and make large passenger planes.