THE mainland’s main stock index sank 4.07 percent yesterday to its lowest close this year as investors dumped shares in companies such as Sinopec Corp. amid fears over a huge supply of new stock.

The Shanghai Composite Index finished at 4,192.533 points, just off an intraday low of 4,182.774. The level was also the index’s lowest close since July 20 last year. The Shenzhen Composite Index fell 3.7 percent to 1,331.23.

Turnover in Shanghai A shares shrank to 93 billion yuan (US$13 billion) from Friday’s 109 billion yuan. Falling stocks in Shanghai outnumbered gainers by 785 to 105.

“The index is on the way to near 4,000 points as fears of new share sales and Sinopec’s fall drag down most other large caps,” said Zhang Yanbing, analyst at Zheshang Securities.

Sinopec was down 4.03 percent to 16.19 yuan after saying it had raised the maximum possible 30 billion yuan from its convertible bond offer, which had a coupon of 0.8 percent. The stock has lost 13 percent in the last three trading days.

China Railway Construction is offering up to 22.246 billion yuan worth of A shares in Shanghai.

Analysts said the offer was hurting the market by draining funds temporarily as subscriptions were taken and by fuelling concern about the market’s ability to absorb fresh supplies of equity in coming months.

The company said yesterday it had made a preliminary decision to cut the number of A shares it would issue by 12.5 percent, after reconsidering its need for funds. But this was not nearly enough to ease the supply fears.

China Unicom fell its 10 percent daily limit to 10.92 yuan on speculation that the telecom group is considering a massive new share offer. But an official at China Unicom denied the market talk.

“This is purely a rumor. The company does not have a new share issue plan,” China Unicom spokeswoman Sophia Tso said yesterday, referring to Internet reports that the firm planned to raise 60 billion yuan to 70 billion yuan from a new share offer.

Yesterday’s plunge occurred after the securities regulator approved at the end of last week, in an apparent effort to support the stock market, the creation of at least five new mutual funds which could raise about 35 billion yuan.

The market’s failure to rebound in response to this news suggested investors had lost faith in authorities’ ability to protect the market in this way. Some hope for stronger action to aid stocks, conceivably even an adjustment in tax policy, but it is unclear if or when this might happen.

“The concern about the supply of shares relative to demand outweighs positive policies which can only have a limited impact,” said Chen Jinren, analyst at Huatai Securities.

Analysts expect the stock market to fall further in the near term on expectations for slowing profit growth, barring market-boosting policies from the government. They put the support for the benchmark Shanghai Composite Index at the psychologically important 4,100 level.

“The slew of equity fund raising plans that surfaced recently has really shaken investor confidence as the market was already weak given a slowing global economy,” said Amy Lin, a strategist at Capital Securities. (SD-Agencies)