China shares fall 0.7pc, turnover at 3-year low

SHANGHAI: China stocks ended down 0.7 percent on Monday amid concerns over an expected increase in supply in the coming year as well as companies' earnings prospects.

The Shanghai Composite Index fell below the psychologically important 2,200 level again although trading remained light in holiday-thinned session, with turnover falling to a three-year low.

"For now, earnings could strongly weigh on the index as many listed companies are likely to post a fall in profits in the fourth quarter," said Chen Yi, analyst at Xiangcai Securities in Shanghai.

The index ended at 2,190.1 points, extending a 0.9 percent drop last week. It has slumped around 22 percent so far this year.

Turnover in the Shanghai market dropped to 36.3 billion yuan ($5.73 billion), the lowest level in three years and falling from Friday's 43.3 billion yuan.

A slew of companies, including China Communications Construction and Shaanxi Coal Industry, are lining up to list on the Shanghai exchange which could weigh on the market, traders say.

Analysts expect the index to move in a narrow range before the New Year's Day holiday.

Banks were among the biggest drag in the market on Monday, with its sub-index falling 0.9 percent.

China Minsheng Banking Corp Ltd declined 1.8 percent, while Industrial Bank Co Ltd fell 1 percent.

But strength in information and technology shares limited a sharp decline in the index after China's State Council said on Friday Beijing would accelerate the development of the Internet industry next year.

Suntek Technology Co Ltd, the biggest gainer in the market Shanghai market, jumped by its 10 percent daily limit, while Sichuan Huiyuan Optical Communications Co also rose by its 10 percent daily limit in the Shenzhen market.

Copyright Reuters, 2011