Ending a four-day rebound, Chinese stocks fell on Thursday because of concern about tightening economic policy and the upcoming launch of stock index futures. The benchmark Shanghai Composite Index, which had gained 7 percent over the previous four days, climbed to an intra-day high of 6,005.131 points in the opening minutes but ended the day 0.68 percent lower at 5,914.285.
Falling stocks overwhelmed gainers by 701 to 147. Turnover in Shanghai A shares shrank to a modest 109.9 billion yuan ($14.8 billion) from 118.3 billion yuan on Wednesday.
Limiting the index's drop was a sharp rise in heavyweight oil refiner Sinopec, up 7.32 percent to 27.70 yuan after China announced a 10 percent hike in domestic gasoline and diesel prices, which should improve Sinopec's margins.
The stock market started falling when the yield at a three-year bill auction by the central bank jumped 20 basis points, after the one-year bill yield surged at Tuesday's sale. Many money market traders interpret the rises as a sign that an official interest rate hike was imminent, or at least that the central bank would continue tightening liquidity policy.
Also causing concern were comments by Zhou Qinye, executive vice president of the Shanghai Stock Exchange, who said at a financial forum that stock index futures would be launched "soon". He added that trade in the futures might initially increase selling pressure on the cash market.
Fund managers believe that to minimise volatility, regulators will not want the stock market to be in an uptrend when futures are launched. "It would be hard for the index to climb above 6,000 points in coming weeks," said Qian Qimin, analyst at Shenying & Wanguo Securities.
But he and others said technical support at 5,500 had been confirmed last month and had been strengthened by a good third-quarter corporate earnings season, which has just ended. "So the index will fluctuate in a range," Qian said.
The latest monthly Reuters poll of fund managers, published late on Wednesday, found them also predicting little upside for now. On average they expect the index to stand at 6,056 in three months' time.
Zhou also said regulators had started the process of approving new QFII quotas for foreign investors in the stock market. No new approval has been granted since February, when the $10 billion ceiling for combined quotas was reached.
But this remark was seen as only modestly positive since Chinese authorities, while they have agreed in principle to raise the ceiling to $30 billion, are expected to remain slow and cautious in approving individual quotas.
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