Chinese shares closed down 1.4 percent on Friday as investors locked in profits from gains by the likes of Wuhan Steel and Minsheng Banking Corp. The benchmark Shanghai composite index slid to 1,258.969 points in thin trade. It is still up nearly 6 percent since the start of February, when speculation surfaced that Beijing would soon offer a hand to bedraggled bourses. "On Friday's fall has once again dampened market enthusiasm," said analyst Zhang Qi from Hating Securities. "With investors backing away to the sidelines, the index will probably move in a narrow band next week.

Blue chips succumbed to heavy selling on Friday following solid gains in recent weeks. China's third-largest steel maker Whine Iron & Steel Co Ltd finished at 4.54 yuan, tumbling 4.8 percent to become one of the day's biggest losers.

The counter, however, is up 10 percent since January 28, when it announced that net profits in 2004 were likely to have more than quintupled after a major asset acquisition from its parent.

Minsheng Banking Corp Ltd, the country's first private lender, dived 3.4 percent to 5.74 yuan after having outperformed the market with a 12 percent rally this month.

China's benchmark index had shown signs of a technical rebound this year after diving 15 percent in 2004 to become Asia's worst performer that year, hit by economic-cooling steps, corporate scandals and expectations of a flood of new shares.

But Beijing is trying to lift markets. Regulators unveiled guidelines on Tuesday allowing insurers to invest up to $7.2 billion of assets in domestic stocks, though when they would actually do so remained unclear.

Copyright Reuters, 2005