A lack of impetus could dampen Shanghai stocks this week after they fell more than 4 percent last week amid concern that losses caused by the massive earthquake in Sichuan Province may be larger than expected.
Moreover, a declining turnover also indicates a fragile sentiment which rules out any immediate major rebound, said Everbright Securities analyst Wu Honghai.
"We saw shares surge on one day and fell sharply the next," Wu said. "The rotation between sectors is too frequent and this may hinder capital from flowing into the market."
The Shanghai Composite Index fell 4.17 percent to end at 3,473.09 last week, as the benchmark index suffered the worst weekly performance in five.
The May 12 quake, which has damaged plants and disrupted production in companies such as Sichuan Hongda Chemical Industry Co, may have caused 67 billion yuan (US$9.6 billion) of losses in the province, the government has said.
Shares of drug makers, cement producers and infrastructure firms were sought last week in anticipation they may benefit from post-disaster relief and reconstruction efforts.
But Qian Qimin, a Shenyin Wanguo Securities strategist, said there's a possibility of speculative trading in the short term and advised retail investors to be cautious. He said the index may move between 3,250 and 3,550 this week.
The share price of Chongqing Road & Bridge Co tumbled the 10 percent daily limit when it closed at 15.29 yuan on Friday after nearly doubling since the quake. Sichuan Road & Bridge Co plunged 9.78 percent to 10.06 yuan on Friday amid profit taking, after surging 10 percent in the previous five sessions.
Telecoms stocks rose on Friday after the government announced an industry reorganization, with China United Telecommunications Corp up 5.18 percent to 9.74 yuan, although analysts said the rise may also have been short-term speculation.
(Shanghai Daily May 26, 2008)
