Shanghai stocks tumble

SHANGHAI: The stock market fell 2.7 percent yesterday, as mutual funds continued to reduce the weighting of stocks in their portfolios to meet the expected increase in redemption by the end of the year.

The benchmark Shanghai Composite Index dropped 137.5 points to close at 4958.04, with 747 of 909 stocks closing lower. The Shenzhen Component Index plunged 4.73 percent to close at 16035.19.

Analysts said that cooling of the stock market had depressed the performance of most mutual funds, prompting many fund managers to drastically cut down their holdings of stocks.

All fund classifications showed decreased profits in November.

Equity funds led the slump with an average 15.05 percent loss. Mixed-asset aggressive funds fell 13.23 percent, while mixed-asset flexible funds dropped 12.71 percent, according to Lipper, which tracks the performance of mutual funds.

The QFII A-share funds posted an average loss of 13.93 percent while redemptions by investors had increased noticeably, according to Lipper.

"Controlling the position became a rational choice for fund managers," Zhou Liang, head of research at Lipper China, said, adding that increasing cash holdings to avoid risk was a "safe choice" in the face of fluctuations.

A lot of funds were also diverted from the stock market yesterday to the subscription of three new initial public offerings to be issued today, analysts said.

China's leading large-sized wind generator sets producer Goldwind Science and Technology Co Ltd, China Pacific Insurance Co and Liaoning Publishing will begin online subscriptions today.