Chinese shares dip lower on forecast of widespread loss-making

China's shares fell slightly lower Friday as many listed firms forecast loss-making in their mid-year corporate performance disclosure.

The benchmark Shanghai Composite Index, which covers both A- and B-shares on the Shanghai Stock Exchange, fell 1.37 percent to 1026.11, while the Shenzhen Component Stock Index lost 0.78 percent to 2,716.67 with turnover shrinking to 5.38 billion yuan (649 million US dollars) and 3.4 billion yuan (414 million US dollars), respectively.

Analysts said the shrinking turnover indicated that investors remain cautious on the market's prospects, mainly due to the ongoing state share sales, slower economic growth expected in the second half, and forecast of widespread loss-making by many listed firms in their mid-year reports.

Zhang Guangyu, an analyst with Southwest Securities Co., noted that shares of some major loss-making firms slumped to their daily maximum of around 10 percent, and the market fall was worsened by the dropping prices of high-tech firms.

It is likely the Shanghai Composite Index may drop below around the 1,000-point level on the coming few trading days, an eight-year low, said Zhang.

But Long Yun, an analyst with web-based Hexun securities information provider, acknowledged that it is highly likely the index would fluctuate in little ranges around the 1,000-point level.

The Chinese government has announced a package of preferential policies and moves to boost the confidence of investors, including plans to allow listed firms to buy back their shares and offer of huge loans to securities firms.

Last month, China started a trial sale of non-tradable shares and has selected shares from more than 40 listed companies to sell.

Non-tradable shares, which are mostly held by the government, account for around two-thirds of China's stock market capitalization.

Source: Xinhua