By Li Zengxin (chinadaily.com.cn)
Updated: 2007-07-06 15:56

Special coverage: Markets Watch  Related readings:  Shanghai index loses 3,600-point mark in morning session  Shanghai index plunges 5.25% amid panic selling  Stocks dive 2.14% in response to tightening prospects

Stocks in the media, finance and hydropower industries were particularly strong today. Hunan TV and Broadcast Intermediary was up nearly 10 percent to lead all stocks in the culture and media sector on a rise. All financial shares, including 10 banks, the two insurers and the two securities houses, were up today, pioneered by Hongyuan Securities with a 10 percent rise and Shenzhen Development Bank up over 7 percent.

B shares surged. Of the 109 listed B shares, 101 finished up and two ended flat. Hefei Meiling rocketed 10 percent as the largest gainer. Closed-end funds were also strong for the whole day, even when the market was plunging during the morning session.

As the stocks closed lowest since May 30 yesterday, there were 120 stocks cut by half of their share prices by yesterday's closing compared with their levels before May 30. Jilin Guanghua Holding Group was down 59 percent as the biggest loser. In addition, 780 stocks were down 30 percent to 50 percent. Totally, share prices of 1,060 were lower than the pre-May 30 period.

By yesterday's closing, the total market value of all securities listed on the two exchanges was 15.706 trillion yuan, down 3.318 trillion yuan or 17 percent from that of May 29, the day before the stamp tax hike.

In the diving waves, some 40 percent of retail investors started to see loss in their capital flow balance charts, said an industrial report yesterday, triggering fear of the market transferring from a "fast bull" to a "slow bear".

A series of moves have dampen investor confidence in June, including interest tax slash, the proposed 1.55 trillion yuan special bond issuance, an enlargement of investment scope of the qualified domestic institutional investor scheme and the red-chip return wave expected in the second half of the year.

Large-scale listings in the coming months will put more pressure on the market, said analysts. In the first half of the year, initial public offerings (IPOs) on the Chinese mainland reached 160 billion yuan, larger than the whole year of 2006.

As regulatory and technical problems being cleared, more IPOs including returning red chips and debuting commercial banks are expected during the second half. Total fund raising for the whole year of 2007 is seen to reach 400 billion yuan, according to PriceWaterhouseCoopers.

After the recent turbulence in the stock market, regulators started to release conciliating news. But analysts believe investor confidence is not to be regained quickly this time.

The Ministry of Finance pledged yesterday the special bonds of 1.55 trillion yuan will not cool stock market. The sale of the bonds, which will be used to buy foreign exchange reserves to help set up a state investment firm, will replace part of the central bank bills to mop up excess liquidity, said the ministry.

It noted the special bonds won't directly affect the existing liquidity in the stock market and it won't directly sell the debt to the People's Bank of China. Sources said the State investment company may start operation in September and be named China Investment Co Ltd.

Sources also said the State-owned Asset Supervision and Administration Commission is mulling various measures to slow down the pace of the State-share split transition, in a bid to reduce the impact of the release of State-held shares to the common investors.

The core contents of the measures are: the reduction of State-held shares in companies of less than 1 billion shares may not exceed 5 percent of the total share base in consecutive three years; for companies with over 1 billion shares, the deduction of State-held shares may not exceed 5 million shares in each of the transition incidence, and may not exceed 3 percent of the total share number in consecutive three years.

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