Shanghai shares/morning close -- 2 (A-share outlook weak: analyst)

Shenyin and Wanguo Securities analyst Yan Dinggong said he believes the A-share gains, which drove the composite index further above the key psychological resistance level of 2,000 points, were largely the result of institutional support. He said institutions which have been unable to take profits on positions built last year are seeking to drive prices higher in the hope of creating opportunities for quick profit-taking, while the longer-term outlook for A-shares appears negative. In particular, strong gains in hi-tech shares came despite a correction in the NASDAQ overnight. "In general terms, the market mood is not very good. Most recent comments from officials have pointed to underlying risks," he said. He said Premier Zhu Rongji recently indicated that the growth target for this year will be 7 pct, slower than last year's GDP growth of 8.1 pct. Other comments from officials during the current meeting of the National People's Congress have also pointed to uncertainties about the outlook for growth in GDP, exports, consumption and non-state fixed-asset investment, he said. In addition, the China Securities Regulatory Commission chief advisor recently warned that opening the B-share market to domestic individuals had increased B-share market risk. CSRC chairman Zhou Xiaochuan was also reported recently as saying that there will be no merger of A-share and B-share markets in the coming 5-10 years. All of these comments point to heightened market risk, Yan said, adding that "now is not the right time for people to invest in A shares." Despite the heightened risk of investing in B-shares, domestic individuals continue to rush to buy B-shares. Yan cautioned that the small capitalisation of the B-share market makes it easy for institutions to manipulate prices. Although rules governing the A-share market ban investors from buying and selling the same stock in a single day, there is no such restriction in the B-share market, he said, adding that this makes it easier for institutions to cross-trade B-shares. "There's a lot of cross-trading, so the turnover isn't very accurate. High turnover doesn't necessarily mean the market is still hot," he said. Yan added that many B-shares are already overpriced, particularly given the weak earning capacity of many B-share firms. On its first day of trading, Inner Mongolia Baotou Steel Union closed the morning at 6.45 yuan, up 1.27 from its issue price of 5.18, on volume of 130.7 mln shares. Among hi-tech and network-related stocks, Jiangsu Zongyi rose 1.75 yuan to 22.08 on 3.6 mln shares, while Shanghai Maling gained 1.03 to 14.9 on 2.9 mln shares and Shanghai Orient Pearl rose 0.95 to 27.05 on2.7 mln shares. Minsheng Bank shed 0.19 to 17.52 on 2.9 mln shares, while Pudong Development Bank dropped 0.13 to 20.77 on 1.3 mln shares. Among B shares, Zhejiang Southeast Electric Power rose 0.042 usd to 0.717 on 16.9 mln shares, while Worldbest Kama gained 0.045 to 0.505 on 16.6 mln shares and Shanghai Linyun Zhengsheng rose 0.061 to 0.809 on 15.9 mln shares. Huangshi Dongbei rose 0.049 to 0.616 on 13.2 mln shares.

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