Stocks in firms from China's frontline province with Taiwan dived on Monday after the island's tumultuous presidential elections, but overall markets closed at their highest level in more than two years.
Investors dumped companies based in Fujian, just across the strait from Taiwan, pushing Xiamen Airport Co Ltd down by its daily 10 percent limit to 10.90 yuan, as they worried President Chen Shui-bian's re-election would limit trade co-operation.
But the benchmark Shanghai composite index, grouping hard-currency B shares and yuan-denominated A shares, rose 0.45 percent to finish at 1,755.685 points - the highest close since December 4, 2001, when it closed at 1,769.681 points.
Chen squeaked back into office by the thinnest of margins on Saturday in a win contested by the opposition. Brokers said mainland investors had been counting on a victory by the more moderate opposition leader Lien Chan, who declared the result invalid and demanded a recount. The win by the independence-leaning Chen, whom Beijing regards with suspicion, would slow down talks between the island and the mainland on opening up trade and business links, analysts said.
"Fujian shares had recently jumped on hopes of possible closer links with Taiwan," said analyst Zhang Yong at Shanghai Securities. "But the controversial outcome of the weekend election is now triggering profit-taking.
Despite Monday's limit-down plunge, Xiamen Airport's A shares, open to a small group of select foreign investors, are still up 40 percent from the start of 2004 as investors had bet on improving business ties - if Lien had won the election.
On Monday, property developer Xiamen C&D Co slid 3.6 percent to end at 10.91 yuan and Xiamen International Trade Group Corp dipped 0.4 percent to 9.1 yuan.
The two stocks had dived more than five percent in early trade.
But the calm on China's overall market belied volatility in other markets around the region.
Stocks in Taiwan, which Beijing regards as a rebel province, closed down 6.7 percent, while Hong Kong's Hang Seng index finished 1.9 percent lower.
"Many Chinese investors saw the weekend's election results as a neutral outcome because Chen failed to win support for his referendum," said Haitong Securities analyst Zhang Qi.