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September 30, 2009

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Caution blamed for low close

SHANGHAI'S key stock index closed lower yesterday, with steel producers weaker on concern over excess capacity and investors wary about an excess of equities as new share sales loom. The market is now trading at a one-month low.

The benchmark Shanghai Composite Index shed 0.33 percent, or 8.98 points, to close at 2,754.54. Turnover was 74.3 billion yuan (US$10.9 billion).

Today is the final trading day before the market closes for the eight-day National Day holiday. When trading resumes on October 9, the market faces the prospect of a record 2 trillion yuan of initial share offerings in the pipeline.

"Investors were cautious ahead of the long break because there will be even more new share sales in the next month," said Wang Junqing, an analyst with Guosen Securities.

Much of the market's momentum may also depend on the economy. Data showing improvement in investment, lending and industrial production helped lift shares to a 2009 high in August, but Yao Jingyuan, chief economist of the National Bureau of Statistics, has warned the nation still stands short of a full recovery.

"If economic figures in October continue to improve, that may very likely lift the index, and the current low level of prices may prove to be a good point for buying," said Wang.

On the other hand, the market "may fluctuate if there are no positive signs of economic recovery," said Chen Wei, a United Securities analyst.

Steel makers lost ground, amid concerns about supply outstripping demand. Baoshan Iron and Steel Co dipped 0.31 percent to 6.44 yuan. Wuhan Iron and Steel retreated 2.12 percent to 6.91 yuan, while Ma'anshan Iron and Steel Co slid 1.9 percent to 4.12 yuan.

Zijin Mining Co tumbled 0.48 percent to 8.29 yuan. Jiangxi Copper Co dropped 1.27 percent to 32.64 yuan, and Yunnan Copper Co retreated 1.65 to 24.42 yuan.

Banks were among the gainers after a report suggested new loans in September may nearly double from August to 600 billion yuan.

Shanghai Pudong Development Bank advanced 2.98 percent to 19.67 yuan.

China Industrial Bank rose 3.69 percent to close at 33.15 yuan, and the Bank of Communications was up 1.47 percent to 8.31 yuan.


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