UPDATE 1-Shanghai stocks plunge on weak H.K., cash calls

(For Hong Kong stock market reports, click [.HK])

SHANGHAI, Jan 21 (Reuters) - China's stock market plunged on Monday in response to another tumble by Hong Kong share prices and news of heavy cash calls.

The Shanghai Composite Index .SSEC ended the morning down 2.32 percent at 5,060.334 points, after hitting a one-month low of 5,026.127 at one stage. The index has tumbled nearly 8 percent over the past five trading days.

Losing stocks outnumbered gainers by 563 to 289 in Shanghai. Turnover in Shanghai A shares was a modest 63.5 billion yuan ($8.8 billion) against Friday morning's 62.7 billion yuan, when turnover shrank to a three-week low.

PetroChina (601857.SS)(0857.HK), the biggest stock, dropped 2.85 percent to 28.26 yuan, after reaching a record low of 28.01 yuan earlier in the morning.

Bank of China (601988.SS)(3988.HK) slid 2.91 percent to 6.33 yuan after Hong Kong's South China Morning Post quoted unidentified Chinese banking sources as saying it expected to make a significant write-down of U.S. subprime-related securities for the fourth quarter of last year, which could hurt its profit or even send it into the red in 2007.

The newspaper said regulators had warned China's leadership that Industrial & Commercial Bank of China (1398.HK)(601398.SS) and China Construction Bank (0939.HK)(601939.SS) would also have to make provisions for all their exposed subprime-related assets. ICBC shares lost 2.80 percent to 7.64 yuan, while Construction Bank fell 2.44 percent to 9.18 yuan.

The announcement at the weekend of big cash calls by several companies also hurt the market because of the prospect of heavy additional share supply.

Ping An Insurance (601318.SS)(2318.HK) plunged 6.99 percent to 91.35 yuan after announcing a plan to sell $22 billion of new A shares and convertible bonds, the biggest equity refinancing by a Chinese company.

Northeast Securities (000686.SZ) slid 6.62 percent to 50.78 yuan after saying it planned to raise up to 15 billion yuan by placing new shares with as many as ten institutional investors.

In addition, China Coal Energy Co (1898.HK), the country's second-biggest coal producer, launched on Monday its initial public offer of shares in Shanghai, which could raise about US$4.5 billion in one of China's ten biggest IPOs.

Demand for the IPO is expected to be strong, and normally, the stock market could handle the big cash calls without great difficulty. But sliding foreign markets and tightening monetary policy at home have dented investor confidence in the past week, traders said.

While they expect to see more buying interest emerge around 5,000 points, many believe the index may head in coming days or weeks for its December low of 4,812 points, having broken all major technical supports above that level late last week.

The official Securities Times said fourth-quarter reports by the 218 Chinese non-QDII funds that had released reports so far -- over two-thirds of the total number of funds -- showed the fund industry suffered a combined quarterly loss for the first time since June 2005.

"This news increases the pressure of redemptions on funds, and along with the prospect that supplies of new shares will drain money, it has hurt sentiment," said Zhou Lin, analyst at Huatai Securities.

China Eastern (600115.SS)(0670.HK) edgd up 0.94 percent to 20.32 yuan after the parent group of Air China (601111.SS) (0753.HK) proposed a "strategic partnership" which it said could bring China Eastern a US$1.9 billion cash injection and involve a tie-up of many of the two airlines' operations. (for details, click on [ID:nSHA19493])