CHINA’S shares closed down yesterday, snapping a seven-session winning streak as the recent rally in banks stalled with investors digesting the government’s move over the weekend to formally propose a deposit insurance system.

    The government Sunday released a draft of a plan to insure up to 500,000 yuan (US$81,000) in deposits made by businesses and individuals per bank. Banks and the general public have until Dec. 30 to comment on the proposal.

    While the State Council statement doesn’t specify when the program will begin, officials involved in the deliberations say it could be put in place as early as January.

    The benchmark Shanghai Composite Index ended down 0.10 percent at 2,680.16 after a 9.5 percent gain over the previous seven sessions. Volume fell slightly to 401.1 billion yuan (US$65.3 billion) from Friday’s 402.0 billion yuan. The Shenzhen Composite Index fell 0.55 percent to 1,412.56.

    Analysts attributed to the retreat yesterday to profit-taking following the market’s recent rally as well as a slump in the Hong Kong market. Still, investors unanimously remain bullish over the longer term, citing the potential for further monetary easing.

    Additional funds will likely keep flowing into the stock market on hopes of higher investment return compared with other alternatives such as money-market funds, said Zhang Gang, an analyst at Central China Securities.

    Guo Feng, chief investment adviser at Northeast Securities, said “the Shanghai index may consolidate with an upward bias, thanks to hopes of a cut in banks’ reserve requirement ratio, after latest data pointed to a weaker growth. (SD-Agencies)