THE Shanghai stock index closed lower after investors began selling Shanghai Yanzhong Industrial, the object of China's first stock market takeover bid, on fears that legal action may derail the deal, traders say. Yanzhong, which has risen sharply in recent weeks and helped push the Shanghai stock exchange to a record 3.4 billion yuan turnover on Thursday, dropped 10.41 yuan to end at 24.20. Yanzhong has been driving force behind market movement, and the Credit Lyonnais A share index mirrored its fall by dropping 90.8 points or 1.72 per cent to end at 5,200.64. Dealers said many investors were worried Yanzhong might have legal means to block a hostile takeover bid by Shenzhen's Bao An Group, a raid which had more than tripled the trading price of Yanzhong shares in three weeks. Yanzhong said on Wednesday it had initiated legal proceedings against Bao An. Dealers said investors began unloading Yanzhong in afternoon trading, although speculative support grew at 23 yuan. Fujian Fuyao was the day's biggest gainer, rising 0.31 yuan or 1.35 per cent to end 23.38 on expectations of a rights issue. The Shanghai B index fell by 7.47 points or 0.91 per cent to end at 817.98 in quiet turnover. Number 2 TM, which gained 1.9 per cent, was the most actively traded stock. Refrigerator and Outer Gaoqiao also closed higher while other counters ended between two and four per cent lower or unchanged. In Shenzhen the A index dropped 17.45 points or 0.88 per cent to 1,955.65. The B index lost 1.73 points or 0.16 per cent to 1,064.45. Most counters closed unchanged. The worst performer was Huafa, losing 5.7 per cent, while the best was Shekou Port, adding two per cent. The Shanghai swap centre rate closed unchanged at 8.7 yuan to the US dollar on turnover of US$22.56 million. In Shenzhen the rate closed at 8.72.