China stocks drop 3.5 pct in heavy trade, B shrs dive

Reuters - Tuesday, November 24

SHANGHAI, Nov 24 - China's key stock index slid 3.45 percent on Tuesday while turnover jumped to a four-month high, as the dollar-denominated B-share index <.SSEB> plunged and technical signals pointed an overbought market.

The Shanghai Composite Index <.SSEC> ended at 3,223.526 points, posting its biggest daily percentage drop in nearly three months. The market reversed course late in the session after climbing to a 3-½ month intraday high early in the day.

Losing Shanghai A shares overwhelmed gainers by 856 to 50 while turnover jumped to a four-month high of 289 billion yuan from Monday's 203 billion yuan, suggesting funds were fleeing the market as investors locked in profits from recent gains.

"The market has consolidated after recent sharp gains brought mounting profit-taking pressure," said Zhang Qi, senior analyst at Haitong Securities in Shanghai.

The 14-day Relative Strength Index had hit a four-month high of 75 by midday, above the overbought mark of 70.

The B share index closed down 7.34 percent at 242.025 points, as investors pocketed profits from recent gains, propelled by market talk which included rumours that China might merge B shares with the coming international board to be set up for foreign companies listing in Shanghai.

"A lack of government market-boosting steps sparked profit-taking today, although we see no major negative news for the market," said a trader at a major Chinese brokerage.

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