Shanghai shares/ close -- 2 (institutions cautious about driving gains)
Guotai Junan Securities analyst Zhang Jun said A-shares lack direction since institutions have become more cautious about pushing share prices higher. He said institutions tend to take a longer-term view than retail investors, and hence are more concerned about the prospect of a slowdown in domestic growth as the external environment deteriorates. Institutions also feel it will be difficult to push the prices of hi-tech and internet-related shares higher given the weak performance of NASDAQ, he said, adding that these types of shares have been a key driving force behind previous institution-led gains on the broader market. At the same time, there are continuing rumours that the government will soon launch a policy of floating state shares in listed firms, and concerns that this will act as a drain on market liquidity. In the longer term, there are concerns that the launch of the planned second board market will also drain liquidity from the main board markets, he said. Nonetheless, downside risk currently seems limited, since most stocks have remained rangebound despite index gains, leaving little scope for profit-taking, he said. Meanwhile, institutions which retain large positions in the market continue to give support to prices, he said. Shiji Investment Consulting analyst Hua Yi said indices continue to trend higher amid institutional support, while many stocks with smaller index weightings remain flat. "The composite index looks likely to reach a record high very soon, even though many stocks are lagging the index." Despite the gains, there are some concerns about a recent increase in planned share offers. "In the two weeks since the China Securities Regulatory Commission issued a document to lower the threshold for companies seeking to launch rights issues and issue additional shares, more than forty firms have announced they will issue additional shares," he said. The CSRC's new regulations lower the required return on net assets for companies allowed to offer additional shares to 6 pct from 10 pct, he said. Companies with a return on net assets below 6 pct can also offer additional shares if they promise that this year's return on net assets will be higher than in the previous year, he added. Hua also said that since there are some concerns that the launch of the second board and the flotation of state shares in listed firms will have a negative impact in the second half, some institutions are currently pushing prices higher in order to take profits before this negative impact emerges. Shanghai Raw Water gained 0.15 yuan to 9.85 on 23 mln shares. Shanghai Automotive rose 0.19 yuan to 13.97 on 8.3 mln shares, while Dongfeng Automobile gained 0.16 yuan to 9.35 on 6.2 mln shares. Baoshan Iron & Steel rose 0.01 yuan to 5.71 on 8.2 mln shares, while Beiman Special Steel gained 0.4 yuan to 8.47 on 6.8 mln shares and Baotou Steel Union rose 0.02 yuan to 6.72 on 5.1 mln shares. China Minsheng Banking gained 0.28 yuan to 19.15 on 6.2 mln shares. Among B shares, Shanghai Lujiazui Finance rose 0.022 usd to 0.805 on 15.3 mln shares, while Shanghai Chlor-Alkali gained 0.009 usd to 0.629 on 13.1 mln shares. Zhejiang Southeast Electric Power rose 0.005 usd to 0.818 on 13.3 mln shares, while Heilongjiang Electric Power closed unchanged at 0.837 usd on 7 mln shares.
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