By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-11-30 16:09

Chinese stocks failed on Friday to extend yesterday's broad gains, as investors resumed panic selling amid monetary tightening fears.

The Shanghai Composite Index declined steadily today to close 2.63 percent lower at 4,871.77 points, and failed to stay above the psychologically important 5,000-point mark regained during Thursday’s 4.16 percent rebound.

High volatility indicated investor sentiment was unstable after more than a month of corrections, analysts said. The measure has lost 20.47 percent since peaking on October 16.

Other indicators also dropped. The Shenzhen Composite Index fell 1.67 percent to 1,236.30, while the CSI 300 index, covering major companies on the two markets, lost 2.16 percent to 4,737.52.

Turnover shrank to 100.4 billion, a drop of 13.77 percent from a day earlier, indicating investors chose to sit on the sidelines in the midst of high uncertainty regarding the coming days.

Fears about a potential interest rate hike in the weekend also weighed on investors.

The central bank is widely expected to raise the interest rate once more before the end of the year to curb inflation and prevent the world's fourth largest economy from overheating. Any rate changes are typically announced on weekends.

The Chinese economy grew 11.5 percent in the first three quarters from a year earlier, on track to register a fifth consecutive year of double-digit growth.

Inflation has also jumped, with the Consumer Price Index (CPI) rising 4.4 percent in the first 10 months year-on-year. That is significantly higher than the three percent target set by the central bank for the whole of 2007.

Blue chips led the decline today in the stock markets. PetroChina fell 4.6 percent to close at 31.52 yuan per share, while Sinopec dropped 3.25 percent to 21.12 yuan.

In the financial sector, China Life lost 2.84 percent to end at 54.83 yuan, followed by China Construction Bank’s 1.83 percent drop, ending at 10.19 yuan.