SHARES in Shanghai closed slightly lower yesterday, led by banks and airlines, because of profit taking and concerns over new domestic initial public offerings which will siphon capital.

The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares shed 0.73 percent to 3,733.50 after three straight days of gains. Turnover rose to 148.30 billion yuan (US$21.14 billion) from 147.57 billion yuan in the previous session. Losers outnumbered gainers 496 to 289 while 12 stocks were unchanged.

"It's natural for a correction after the strong rebound over the previous days, and the market will turn upward in the long term," said Wan Bing, an analyst at GF Securities.

Wang Xingjun, an analyst at Donghai Securities, is also moderately optimistic about the market as "it takes time for investors to regain confidence."

Bellwether stocks, including China Mobile, have applied to issue IPOs in the domestic market, which is expected to put pressure on capital supply, according to media reports yesterday.

Banks and insurance firms were among the decliners yesterday. Bank of Communications lost 3.16 percent to 10.41 yuan while China Construction Bank shed 2.77 percent to 8.06 yuan. Industrial and Commercial Bank of China, the country's largest commercial bank, tumbled 2.55 percent to 6.49 yuan and China Merchants Bank fell 2.75 percent to 33.99 yuan.

China Life Insurance fell 2.05 percent to 36.40 yuan and Ping An Insurance (Group) Co of China lost 1.57 percent to 67.53 yuan.

But GF's Wan is confident that over the long term, banks have the potential to climb as they stand top benefit from the appreciation of the yuan.

China's top three airlines tumbled as crude oil hit a record high of US$120 a barrel.

Air China lost 5.21 percent to 15.46 yuan while China Eastern Airlines shed 4.16 percent to 11.30 yuan. China Southern Airlines declined 5.32 percent to close at 13.18 yuan.

But brokers gained, with Citic Securities, the nation's largest brokerage, adding 1.72 percent to 40.82 yuan. The stock surged 36 percent between April 23 and yesterday. Northeast Securities Co rose 5.44 percent to 36.25 yuan.