BEIJING, July 17 -- Shanghai shares may continue a downtrend this week as investors will likely take profits from recent rallies and jitters over a capital crunch due to upcoming stock issues.

    The Shanghai Composite Index, which covers yuan-denominated A shares and hard-currency B chips, closed at 1,665.21 on Friday, down 3.8 percent from a week earlier, paring its gain to 43.2 percent this year.

    The measure plummeted 4.84 percent on Thursday, the steepest decline in a month.

    "The market is seriously short of capital in contrast to the quickened pace of initial public offerings and secondary sales," said Beijing Shoufang Investment Consulting Co. "The index will drop but gain support above the 1,600 point level."

    A slew of companies including Daqin Railway Co are expected to market IPOs this month. Investors will likely cash out of existing stocks and apply for newly-issued shares, analysts said. Daqin, the first railway operator to list domestically, aims to raise up to 15 billion yuan (US$1.88 billion), the second-biggest IPO after Bank of China's 20-billion-yuan stock sale last month.

    Adding to the concerns was market talk that China's central bank will likely bolster its benchmark interest rate this month as the nation's economy continued to soar and investment showed no sign of abating.

    The country's economy may have expanded 10.9 percent in the first half, accelerating from 10.3 percent climb in the first three months, the Securities Times reported last week, citing unnamed sources.

    Investors face higher risks as the market surged 30 percent in the recent month, to slump sharply this week, Shoufang said in the note.

    The investment consultancy also suggested investors train their sights on the warrant market, which may serve as a safe harbor as stocks start to head south.

    Shoufang predicts the Shanghai Composite Index may move in a range between 1,590 and 1,670 this week.

(Source: Shanghai Daily)