Key Shanghai index closes under 2,000 for 2nd day

Chinese stocks continued to decline on Wednesday amid weak investor sentiment, with the key Shanghai stock index closing below 2,000 points for the second trading day.

The benchmark Shanghai Composite Index slid 0.89 percent to end at 1,973.52 on Wednesday, after finishing below 2,000 points for the first time on Tuesday since January 2009.

The Shenzhen Component Index closed at 7,854.06, down 1.04 percent, or 82.68 points.

Combined turnover on the two bourses shrank to 67.7 billion yuan (10.76 billion U.S. dollars) from 78 billion yuan the previous trading day.

A majority of shares suffered losses during the day, with losers outnumbering gainers by 840 to 118 in Shanghai and by 1,337 to 174 in Shenzhen.

The ChiNext Index, which reflects the performances of high-tech and high-growth potential companies, slid 1.4 percent to 607.67 points, a record-low since it started trading in 2009.

The drop came as investors were waiting for new policies to be outlined by the country's annual Central Economic Working Conference, which is due to open next month, analysts said.

A report by SWS MU Fund Management, a Chinese fund firm based in Shanghai, said positive factors like a highly underestimated market and improved economic data have emerged to support a rebound.

However, the fall showed worries over uncertainties in the market's long-term performance.

Wei Fengchun, an analysts at Shenzhen-based Bosera Asset Management Co., said the biggest confusion for the market now is how will the economy regain its strength -- will it firmly take the path to reform its growth mode or backtrack to old days.

The aggregate market value of the Shanghai and Shenzhen bourses totaled 20.05 trillion yuan by Tuesday, down by 4.3 trillion yuan from May when the indexes on the two bourses reached a year high, according to data from China Securities Index Co.

However, foreign investors have been increasing stakes in the country's stock market on the back of strong confidence in the economy's growth prospects.

About 4 billion U.S. dollars foreign capital have invested in Chinese stock funds in the two months to Nov. 15, taking up more than half of the total capital entering Asian equity markets in the period, according to a survey done by the United States-based Emerging Portfolio Fund Research.

A November survey conducted by Bank of America Merrill Lynch among 248 global fund managers showed that their confidence in the outlook for China's economy has surged to a three-year high.

The Shanghai stock index experienced a free fall to 1,664 points in 2008 from a boom to more than 6,000 points in 2007 due to the global financial crisis.

Li Wenhui, a fund manager in Guangdong, said the equity market is likely to go downward further in the short term, but he ruled out the chance for a dip under 1,664 points.

During Wednesday's trading, ceramic producers dropped the most, with Shanghai CIMIC holdings Co. dipping 5.31 percent to close at 4.81 yuan per share.

Shares of non-ferrous metals companies extended losses Wednesday. Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Co. moved down 5.38 percent to end at 30.27 yuan, while state-owned Aluminum Corporation of China declined 2.14 percent to 4.57 yuan.

Property heavyweights also fell across the board. China Vanke Co., the nation's biggest listed property developer, dropped 1.42 percent to end at 8.34 yuan. Poly Real Estate Group Co., the nation's second-largest listed developer, fell 3.51 percent to 11.01 yuan.

Jiugui Liquor shares tumbled by the daily trading limit of 10 percent for a fourth consecutive trading day to finish at 31.22 yuan. The company recently became the focus of a scandal after tests confirmed that some of its products contained excessive plasticizer content.