Chinese stocks fell on Thursday as brokerages and banks pulled back from gains made on speculation that authorities might soon announce the long-delayed launch of stock index futures.
Financial stocks had surged and the main market index rose 2.48 percent on Wednesday when Fan Fuchun, vice chairman of the China Securities Regulatory Commission, said preparations to launch the futures were proceeding smoothly and that authorities were "basically ready".
But Fan's comments merely repeated remarks by other officials in recent months, and many fund managers doubt the launch is imminent since it could increase volatility in the market. Official media on Thursday gave no indication of exactly when futures trade might begin.
So brokerages and banks were hit by profit-taking on Thursday. The Shanghai Composite Index ended down 1.66 percent at 3,401.437 points, just off its low of 3,400.773. Losing stocks in Shanghai outnumbered gainers by 749 to 144, while turnover in Shanghai A shares was very small at 67.1 billion yuan ($9.7 billion) against Wednesday's 68.4 billion.
CITIC Securities, up 6.16 percent on Wednesday, lost 4.69 percent to 32.69 yuan on Thursday. Industrial & Commercial Bank of China fell 1.35 percent to 5.83 yuan after rising 1.90 percent on the previous day. However, oil refiners climbed with Sinopec up 2.58 percent to 13.12 yuan amid speculation that the government might provide it with further financial aid to offset high global crude oil prices - perhaps by removing its windfall production profit tax.
Analysts said the recent flurries of buying in sectors such as brokerages and oil refiners, on tenuous speculation about possible policy changes, underlined that investors were reluctant to buy into the overall market because of concern about high inflation and this year's economic growth outlook.
"The only impetus to the market on Wednesday was speculation about index futures - today it's speculation about oil refiners. Speculation dominates the market these days because the market as a whole is increasingly worried about inflation," said Qiang Xiangjing, analyst at CITIC-Kington Securities. Sinopec faces technical resistance on its May peak of 13.45 yuan. Any clean break of that resistance would trigger a reverse head & shoulders pattern formed by the March, April and May lows, and pointing it up to the 17.50 yuan area in subsequent weeks.
Among other gainers on Thursday, Dongfang Electric Corp surged 3.21 percent to 33.10 yuan after official media reported the Chinese government had injected 500 million yuan into the company's parent group to help it recover from this month's earthquake.
Hangzhou Binjiang Real Estate, making its debut in Shenzhen, rose 20 percent from its IPO price to 24.30 yuan but underperformed analysts' expectations of first-day trade between 28 and 33 yuan.
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