China financial shares down before Ping An meets

Chinese stocks were mixed on Tuesday but the main stock index was dragged down by financial shares, because of concern that Wednesday's meeting of Ping An Insurance's shareholders might pass its huge stock issue plan.

The Shanghai Composite Index <.SSEC> ended the morning down 0.83 percent at 4,401.316 points, after touching a low of 4,395.241.

The index opened higher, continuing a rally that began late last week, and approached important technical resistance on its 250-day average, now at 4,507 points. But after hitting a high of 4,472.151, the index began pulling back.

Losing stocks in Shanghai only narrowly outnumbered losers by 445 to 442, while turnover in Shanghai A shares climbed to an active 72.8 billion yuan ($10.3 billion) from Monday morning's 63.5 billion.

Ping An's <601318.ss> fund-raising plan could raise some 120 billion yuan, making it by far China's biggest equity refinancing. Many analysts say the result of the shareholder vote remains too close to call.

Shares in the insurer ended the morning down 3.08 percent at 67.95 yuan, off an intra-day low of 67.80 yuan and well off last week's low of 65.01 yuan.

Some analysts say the stock may have little further downside regardless of the result of the vote, since it has already dropped from over 100 yuan since mid-January.

But some other financial stocks suffered bigger losses on Tuesday because of speculation that passage of Ping An's offer could encourage those companies to set similar plans.

Shenzhen Development Bank <000001.sz> tumbled 8.33 percent to 30.25 yuan. A company spokesman could not be reached to comment on the fall in its shares.

Pudong Development Bank <600000.ss>, which last week announced a plan for a large equity offer, was down 5.91 percent to 40.30 yuan.

"Some in the market expect Ping An's plan to be approved. And in any case, the market thinks that given the uncertainty over the result, selling is the safe choice," said Zhang Qi, analyst at Haitong Securities.

($1 = 7.10 yuan)