SHANGHAI'S key stock index dipped 0.65 percent yesterday as blue chips in telecommunications and banking sectors lost ground.

The benchmark Shanghai Composite Index, which tracks the yuan-denominated A shares and hard currency B shares, edged down 22.65 points to end at 3,436.40. The index touched an intraday high of 3,469.06 and an intraday low of 3,409.23.

Losers outpaced gainers 458 to 330 while 65 stocks were unchanged. Transactions totaled 69.3 billion yuan (US$1 billion), an increase from 61.9 billion yuan on Monday.

The Shenzhen Composite Index, which tracks the nation's smaller bourse, slipped 0.48 percent to 1,034.59.

"The merger plan between China Unicom Ltd and China Netcom Group Corp seems to have limited influence on the market. The trading volume was quite low due to weak investor sentiment," said Zhang Xiao, an analyst at Guodu Securities Co.

China Unicom lost 1.54 percent to 9.59 yuan after it resumed trading yesterday.

China Unicom announced on Monday in Hong Kong that China Telecommunications Corp and its listed subsidiary China Telecom will pay 110 billion yuan in cash to purchase the telco's CDMA network assets and business.

Separately, China Unicom's GSM (global system of mobile communications) business will be merged with the country's second largest fixed-line phone operator China Netcom Group Corp through a share swap.

Among banks, shares of Industrial & Commercial Bank of China Ltd, the nation's largest lender, fell 0.34 percent to 5.91 yuan. China Construction Bank Ltd lost 1.12 percent to 7.08 yuan.

But China Merchants Bank Co, the nation's most profitable lender, added 0.03 percent to 29.69 yuan after it sealed a deal to buy Hong Kong's Wing Lung Bank Ltd.