Shanghai shares/close -- 2 (govt support seen driving gains)

Qinghai Securities analyst Tang Gu said A-shares came under slight pressure from consolidation after the composite index yesterday rose to its highest level for the year.	    However, Tang said he expects A-share prices to resume their upward trend in the near future. "The overall environment for the market is very good at the moment," he said.	    "Investors have come to understand the government's position on the market. It (the government) has clearly shown that it will support further price gains, while supervision and punishment of illegal activities will remain limited. 	    "This means people have nothing to worry about," he said.	    Tang noted that the CSRC announced earlier this week that Hua'an Fund Management has been chosen to launch an open-ended fund.	    The announcement indicates that the government is prepared to allow the launch of open-ended funds soon, and is not concerned that the funds will be exposed to risk if they build positions while share prices are at their current levels, he said.	    This appears to show that the government feels share prices still hold upside potential, he added.	    The fact that many companies have reported an improvement in earnings in 2000 should also support further A-share gains, he said.	    Expectations of the imminent introduction of a system of pricing IPOs via bidding also appear to be a factor in the strong A-share buying, he said.	    The new system will reduce the level of gains seen when new listings begin trading, and thus reduce the incentive to subscribe to IPOs, he said, noting that many institutions are already shifting funds from the primary market to the secondary, in anticipation of the launch of the new system.	    more

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