Chinese stocks dropped on Friday, led by coal producers after authorities imposed fresh coal price controls. Financials and property shares were soft after leading sharp gains on Thursday. The Shanghai Composite Index ended Friday down 1.55 percent at 2,865.101 points after hitting a low of 2,851.929. It rose 2.55 percent on Thursday.
Losing Shanghai A stocks outnumbered gainers by 648 to 270 on Friday. Turnover in Shanghai A shares was moderate at 63.7 billion yuan ($9.3 billion) against Thursday's 77.8 billion. Coal shares tumbled with Shenhua Energy down 3.13 percent to 32.19 yuan after the National Development and Reform Commission set caps on thermal coal prices at key ports at their June 19 levels.
Merchants Bank sank 1.61 percent to 25.00 yuan after jumping 5.57 percent on Thursday, while property developer Vanke lost 1.51 percent to 9.15 yuan after Thursday's 6.66 percent gain.
However, the index gained 3.12 percent over the week, and many analysts said its short-term outlook remained positive, partly because authorities are believed to want to avert any sharp fall of the market during next month's Beijing Olympics, a politically sensitive period.
In a sign of authorities' desire to support stocks, at least temporarily, the China Securities Regulatory Commission issued a notice to fund managers this week ordering them to refrain from making negative public comments about the market, or indeed to comment publicly about the trends for stocks.
Technically, the index remains short-term bullish after it triggered this week a symmetrical triangle formed by this month's highs and lows, which suggested July's 17-month low of 2,566 points may have been a longer-term bottom. Many analysts expect a test in coming days of strong resistance between the April low of 2,990 and the psychologically important 3,000 level.
"The index is still likely to reach the 2,990-3,000 level in the short term. The market has performed well this week - at least investors are now sure that the market has escaped from the 2,500 area," said Zhou Lin, analyst from Huatai Securities.
Xuzhou Construction Machinery Science & Technology, which had been suspended since June 12, jumped 9.53 percent to 15.98 yuan after saying it would issue shares to its parent to buy 5.6 billion yuan of assets.
Shenzhen Development Bank rose 1.35 percent to 21.08 yuan after the Securities Times quoted a source close to Newbridge Capital as saying the US private equity firm was in no hurry to sell its 17.89 percent stake in the bank, partly because of its high growth potential.
Also, the Hong Kong Economic Journal quoted an unidentified Chinese media source as saying Ping An Insurance intended to become the biggest shareholder in Shenzhen Development Bank, though it was unclear if regulators or the insurers' cash reserves would permit this.