Shanghai shares/morning close -- 2 (rumours govt orders institutional selling)

An analyst with a domestic securities firm said existing B-share holders have accumulated geat leeway for profit-taking, after four days of maximum B-share gains. However, there are also rumours that the Shanghai Stock Exchange is requiring some domestic securities firms to trim their B-share positions in order to allow retail investors to buy shares. The analyst, who asked not to be identified, said there are rumours that the stock exchange recently held a meeting with senior representatives of domestic securities firms, at which Shenyin and Wanguo Securities, Guotai Junan Securities and Haitong Securities were, in particular, asked to sell some of their B-share holdings. Between them, these three companies are believed to hold more than half of all B-shares, he said. "Since these companies bought their shares when the index was at an average of about 70-80 points, their gains are already huge," he said, noting that many poor quality B-shares are encountering heavy selling today. On the other hand, existing B-share holders generally remain unwilling to sell their shares in good quality companies, he said. One dealer with a foreign securities company said she has also heard rumours that the government is requiring domestic institutions to trim their B-share holdings, adding that domestic institutions today accounted for the bulk of the selling. Foreign institutions were carrying out limited amounts of both buying and selling, the dealer said. Guotai Junan Securities analyst Zhang Jun said that as B-share prices come under profit-taking pressure, this may revive interest in the A-share market, which has seen lacklustre trade in recent days. "After four or five days of trade, people are starting to realise that the B-shares are like the moon in the sky. You can see it but you can't touch it," he said. "Even if investors are able to enter the B-share market, this now involves great risk. So people may now decide to give up on B-shares and return to the A-share market." In particular, some low-priced large-cap A-shares may start to attract stronger interest in coming sessions, he said. Baoshan Iron & Steel rose 0.01 yuan to 5.6 on 10.2 mln shares, while Nanjing Iron & Steel gained 0.32 yuan to 10.05 on 5.4 mln shares. Shanghai International Airport gained 0.04 yuan to 10.55 on 1.4 mln shares. Sichuan Changhong shed 0.09 yuan to 10.99 on 718,000 shares. Among B-shares, Shanghai Chlor-Alkali rose 0.013 usd to 0.540 on 33.9 mln shares, while Shanghai Shangling gained 0.077 usd to 1.23 on 11.4 mln shares. Shanghai Tyre & Rubber shed 0.005 usd to 0.515 on 21.2 mln shares, while Jinan Qingqi dropped 0.018 usd to 0.396 on 30 mln shares. Zhejiang Southeast Electric Power rose 0.061 usd to 0.707 on 111.6 mln shares.

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