A CONTINUED absence of market-boosting policies from the government and PetroChina’s decline below its initial public offering price drove mainland shares to end sharply lower Friday, at a nearly 13-month low.

The benchmark Shanghai Composite Index ended down 4 percent, or off 128.07 points, at 3,094.67, its lowest point since March 23, 2007, when it ended at 3,074.29. The index was down 11.4 percent last week and 49.5 percent off its mid-October record high of 6,124.04. The Shenzhen Composite Index fell 4.2 percent to 930.63.

Analysts pegged the psychological support for the Shanghai index this week at 2,800.

“Many investors are thinking 2,800 now but in a way, I think things have developed to the point where it’s meaningless to give a support figure for Shanghai. The markets are firmly on a downward trend,” said Haitong Securities analyst Zhang Qi.

Analysts said that without market-boosting policies from the government, the markets were likely to be in the doldrums until at least the third quarter.

“If inflation slows in the later half of the year, the government may relax its tight monetary policy. Until then, we should be thankful if the markets end flat. It would be foolish to hope for gains,” said Xu Yinhui, an analyst at Guotai Junan Securities.

Thursday, the statistics bureau said the country’s consumer price index rose 8.3 percent in March from a year earlier, slower than February’s rise of 8.7 percent, but still sharply higher than the government’s target of 4.8 percent for 2008.

The government would continue to implement a tight monetary policy and make economic structural adjustments to help stabilize consumer prices, the bureau said, without elaboration.

Panic spread Friday as PetroChina broke its IPO price of 16.70 yuan (US$2.39). Since the oil giant has the largest weighting in the index, about 16 percent, the break was seen as negative for the whole market, implying institutions were so bearish that they were willing to take losses to exit the stock.

PetroChina closed 5.04 percent lower at 16.02 yuan, after touching a low of 16 yuan, pressured by expectations that high global oil prices would cause losses at its refining operations.

In recent weeks, PetroChina repeatedly hit but did not break its IPO price, and traders said some institutions appeared to be mounting a support operation for the stock to prevent panic in the market. But Friday, this support suddenly vanished.

“The action to support PetroChina’s price may just have delayed the process of the index finding its real bottom. So the break of the IPO price may be a sign that the index is accelerating towards its floor,” said Li Wenhui, analyst at Huatai Securities.

PetroChina’s Shanghai-listed A shares have dropped 64 percent since their first day of trade in November, when they more than doubled, causing the company temporarily to eclipse Exxon Mobil as the world’s largest firm by market capitalization.

The shares may have further to fall. Some traders are talking of targets around 15 yuan and the A shares still command a huge premium of more than 80 percent to the company’s Hong Kong-listed H shares.  (SD-Agencies)