Chinese shares slump 3.79 percent in morning trade

Chinese share prices ended the Thursday morning session 3.79 percent lower amid fears about the impact of the massive numbers of shares being released into the market, dealers said.

They said underwriters might cash out at the end of the lock-up period for several issues, referring to a period after an initial public offering when employees and others who have been given shares are not allowed to sell.

Meanwhile, ordinary shareholders, unfamiliar with the unlock practice, started to panic and dump their shares at a loss, according to the dealers.

Large insurers like Ping An Insurance and China Pacific Insurance would be under selling pressure at the end of their lock-up periods, state media reported earlier.

China Pacific Insurance extended its eight percent losses in the previous session further, falling 5.11 percent to 26.55 yuan (3.74 dollar), below the 30 yuan at its initial public offering in Shanghai in December last year.

Around 300 million of its A shares became freely tradeable on Wednesday as its lock-up period expired.

"The expiration of the lock-up period for shares will add to the selling pressure and dampen market sentiment, affecting other heavyweights like oil refiners and banks," said Liu Youcheng, an analyst at Hong Yuan Securities.

PetroChina, the biggest index component, slumped 6.64 percent to 17.30 yuan, inching closer to its initial public offering price of 16.70 yuan. Sinopec also tumbled 4.75 percent to 11.84 yuan.

"PetroChina's weaker-than-expected net profit report for 2007 led to a continuous slump for days," Liu added.

PetroChina reported last week that its net profit of 145.6 billion yuan for 2007 was at the lower end of analysts expectations.

The benchmark Shanghai Composite Index, which covers both A and B shares, tumbled 136.77 points to 3,470.09.

The Shanghai A-share Index shed 143.61 points or 3.79 percent to 3,640.69. The Shenzhen A-share index was down 37.59 points or 3.10 percent to 1,175.60.

Baoshan Iron Steel, the country's largest steel maker, tumbled 5.92 percent to 13.50 in morning trade after it said its 2007 net profit fell 2.8 percent year-on-year to 12.7 billion yuan due to higher iron ore prices.

(Agencies)