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SCMP Reporter

Mainland investors ignored a pep talk from a senior securities official yesterday and  dumped shares for a third day as concerns about an imminent interest-rate rise and the deteriorating world economy increased.
The Shanghai Composite Index slipped 8.584 points or 0.22 per cent to 3,962.673. For the week, the benchmark lost 337.842 points or 7.86 per cent, the biggest weekly drop since the week  to February 1.
Yesterday's dip  doused bullish comments by Fan Fuchun, a vice-chairman of the China Securities Regulatory Commission,  that investors should have faith in the market as the economy's fundamentals remained strong.
Mr Fan's remarks, published on the front page of the Shanghai Securities News, was the watchdog's latest effort  to talk up the sliding market.
'He is trying to restore confidence,' said GF Securities analyst Zhang Wancheng. 'It is sending a positive message to the market, but they are not doing anything.'
The Shanghai index has tumbled 24.69 per cent this year and is 34.95 per cent  off its  historic high of 6,092.057 points reached on October 16 last year.
In Hong Kong, the Hang Seng Index dropped 1.17 per cent in the past week, raising its losses for the year so far to 20.05 per cent.
Analysts said the mainland market had run out of steam, battered by fears of an influx of fresh equity and concerns Beijing is preparing to raise interest rates to control inflation.
The economy  should grow  almost 8 per cent this year while the consumer price index rise would slow to 4.8 per cent, creating a positive environment for the  market, Mr Fan said.
But words may not be enough for investors, who are pinning their hopes on more concrete government incentives such as a cut in stock trading tax.
Mr Fan said Beijing would not take specific actions to spark a rally.
Analysts said the regulator was worried a  state-orchestrated rally would create an exit for those who remained bearish on the overall market outlook, triggering a more severe downturn.
The Shanghai Composite Index on Thursday fell below the key 4,000-point level  to an eight-month low, as investors believed the bull run had  ended.
'As long as there is no positive news in the market, the Shanghai  index is likely to stay below 4,000 for a time,' a  fund manager said.
Caijing magazine said the CSRC had ordered fund houses to keep at least 70 per cent of their assets in stock investment, an apparent move to avoid a panic sell-off.
According to insiders, fund managers astute in forecasting the market outlook were eager to pare down their positions, believing the market would remain bearish.



Regulator's pep talk fails to halt Shanghai stock sell-down