Shanghai shares/close -- 2 (domestic B-share demand remains high: analyst)

Qinghai Securities analyst Chang Jing said B-share prices traded lower on profit-taking, although domestic demand for the shares remains high. He said that Zhou Xiaochuan's statement that the merger of A-share and B-share markets will not take place in the next 5-10 years appears to have dampened widespread hopes of a quick merger. Although Zhou's comments, as well as those of Neoh, seem to have done little to quell domestic investor enthusiasm for B-shares, they could contribute to a weakening of sentiment over coming sessions, he said. "These two speeches should remind people of the risks of investing in B-shares, so this should ultimately cause investors to cool down a bit," he said. He noted that Shanghai's B-shares are now trading at an average of about 34 times earnings, while Shenzhen's are trading at 17 times earnings. Chang added that he sees little prospect of an A-share rally in the near future. He also said he does not expect the current meeting of the National People's Congress to generate strong leads for the market. Haitong Securities analyst Yu Xiaoli said the sharp B-share correction may cause B-share buyer interest to wane in coming sessions due to increasing concerns among existing shareholders that they will not be able to take maximum profits if they do not sell quickly. She said the declines may continue until the bulk of B-shares have changed hands, after which prices could again rebound to their recent highs. She added that institutions may give support to B-shares, cushioning price declines while they take profits. She added that another B-share rally may be unlikely until after June 1, when a change in regulations will allow domestic individual investors to use foreign currency deposited after Feb 19 to trade B-shares. Yu said the A-share market generally lacks direction, although good quality companies are likely to be the focus of buyer interest as the reporting season gathers momentum. Baoshan Iron & Steel dropped 0.02 yuan to 5.59 on 22.9 mln shares, while Guangdong Iron & Steel rose 0.15 yuan to 8.77 on 4.9 mln shares. Shanghai Automotive gained 0.02 to 12.79 on 11.6 mln shares, while Dongfeng Automobile closed unchanged at 9.13 on 5.9 mln shares. Minsheng Bank rose 0.12 to 17.33 on 6.3 mln shares. Among B-shares, Zhejiang Southeast Electric Power dropped 0.038 usd to 0.673 on 50.6 mln shares, while Heilongjiang Electric Power declined 0.022 to 0.947 on 20.5 mln shares. Linyuan Zhengshen gained 0.016 usd to 0.709 on 40.8 mln shares. Inner Mongolia Erdos rose 0.015 usd to 0.83 on 43.1 mln shares. Phoenix was up 0.044 to 0.75 on 28.4 mln shares.

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