Shanghai shares/close -- 2

Hong Kong-Macau Information Investment dealer Tang Jie said the gradual release of information on the government's plan for the flotation of state shares has eased investors' concerns that the flotations will have a significant negative impact on the market.

	    "Although there has not been an official announcement yet, most people already know what the government has in mind (for the flotation of state shares)," he said.

	    A report in the China Business Times yesterday cited a government official as saying that the government's plan involves the sale of some of the shares via placements to the secondary market, and the sale of some via IPOs and additional share offers.

	    Some state shares will be sold to non-state enterprises, while some will be repurchased by the listed firms themselves, the official said.

	    Although the flotation of state shares is no longer seen as a negative factor, there are still few positive leads to point to sustainable share gains, Tang said, noting that the continued thin turnover points to underlying cautious sentiment.

	    "The bull market has already lasted for more than a year without a major correction, and the economy this year does not provide any reason for a further rally."

	    "Investors expectations for further gains are still very limited," he said, adding that A-shares could at any time correct from their recent gains.

	    Zhejiang Securities analyst Yu Lei said A-shares followed B-shares lower in the second session, although he added that he sees little chance of a major A-share correction in the near term.

	    At the same time, there is little prospect for sustained A-share gains amid a weaker economic environment and the continuing crackdown on illegal share transactions, he said.

	    "We are going to see smaller amounts of illegally-invested money in the market, and since the domestic market is liquidity-driven, this will cap share price growth," he said.

	    Among the "Three Withouts", Shanghai ACE rose 0.4 yuan to 14.8 on 24.7 mln shares, while Xingye Housing gained 0.12 to 19.72 on 18 mln shares and Shanghai Feilo rose 0.18 to 13.01 on 11.1 mln shares.

	    Shanghai Automotive gained 0.01 yuan to 13.89 on 5.1 mln shares, while China Minsheng Banking dropped 0.05 to 19.16 on 5 mln shares and Shanghai Airport declined 0.1 to 10.63 on 8.8 mln shares.

	    Among B-shares, Jinan Qingqi rose 0.024 usd to 0.716 on 49.8 mln shares, while Shanghai Erfangji gained 0.018 to 0.907 on 19.5 mln shares.

	    Zhejiang Southeast Electric Power gained 0.001 usd to 0.927 on 19.1 mln shares, while Heilongjiang Electric Power dropped 0.006 to 0.909 on 18.5 mln shares.

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