Index touches 43-month low

Investors' nerves were rattled on Wednesday as the country's major stock index dipped below the psychologically important level of 2000 points for the first time in 43 month.

The Shanghai Composite Index touched a low of 1999.48 points at 2:54 pm, before closing at 2004.17 points at 3 pm, down 1.24 percent, or 25.12 points. The index dropped as the regulator restarted new IPO examinations, amid reports that a flood of restricted shares will hit the market in October. The last time the index touched that level was in February 2009.

"We are back to the '1' era again. Who knows if we are going to enter the '0' era," said Li Jianshu, an individual investor in Shanghai, who trades daily on the A-share market.

He added that the news was a "shock" to many investors, and said he will probably quit the stock market for good.

Industrial and Commercial Bank of China Ltd, the A-share market's biggest stock by market capitalization, dropped 0.27 percent, or 0.01 yuan, to 3.64 yuan (58 US cents). China Shenhua Energy Co Ltd, China's biggest coal company, dropped 0.46 percent, or 0.1 yuan, to 27.71 yuan. China's two biggest oil companies, Sinopec and PetroChina, both ended the day with losses.

The Shanghai index had fallen 8.88 percent in the year to Wednesday and 4.2 percent over the past month.

Wang Jianhui, chief economist with Southwest Securities Co Ltd, said the decline comes as investors are frustrated by the performance of the economy.

"Recently released economic figures haven't shown any signs of a pickup in the macro economy, and investors are starting to feel upset and gloomy regarding the future," he said. Wang predicted the Shanghai index will rebound to about 2080 points by Friday, as the market recovers from "over-selling".

Zhang Qi, a stock analyst with Haitong Securities Co Ltd, said the market will not improve much in the foreseeable future as a large amount of restricted shares hit the market.

The NASDAQ-style growth enterprise board is the most under pressure, with restricted shares worth around 50 billion yuan expected to hit the market in October, 15 times the amount this month.

Meanwhile, regulators have started examining IPO applications again after a two-month hiatus.

A panel under the China Securities Regulatory Commission said it will convene a meeting on Friday to look at two IPO applications. The panel last met on July 31. The news spooked some investors, who fear that new IPOs will siphon funds from existing shares and put pressure on the market.

In Hong Kong, the benckmark Hang Seng index ended the day down 0.83 percent, or 170.95 points, at 20,527.73 points.

The China Enterprises Index, which tracks mainland companies listed in Hong Kong, fell 1.2 percent. Warren Buffett-backed BYD Co Ltd, an electric car maker, slumped 9.8 percent after agencies slashed its target price on a gloomy business outlook.

South Korea's KOSPI index dropped 0.55 percent, or 10.97 points, to 1980.44 points, and benchmark indexes in Australia and New Zealand declined.