Shanghai A-shares close slightly lower; B-shares higher in volatile trade

SHANGHAI (AFX-ASIA) - A-share prices closed slightly lower, after briefly rising above the 2,200 points resistance level on the composite index, on heavy profit-taking and a continued lack of fresh leads, dealers said.

	    Profit-taking strengthened during the session amid doubts about the market's upside potential, with some analysts saying 2,200 points is likely to be the top of the market's current trading range.

	    B-share prices closed slightly higher after rebounding from their lows in the final minutes of trade amid thinner turnover than yesterday, they said.

	    B-share trade remained volatile, with many investors concerned that prices could drop sharply if sentiment turns. But domestic buying also remained strong amid hopes of a surge in liquidity from June 1, when domestic individuals gain the right to use foreign currency deposited after February 19 to invest in B-shares.

	    The A-share index dropped 5.50 points or 0.23 pct to 2,287.83 on turnover of 14.56 bln yuan after trading between 2,298.92 and 2,280.93.

	    The B-share index closed 1.10 points or 0.53 pct higher at 207.32 on turnover of 280.3 mln usd after trading between 208.63 and 205.41.

	    The composite A- and B-share index closed 4.86 points or 0.22 pct lower at 2,194.65 on turnover of 18.72 bln yuan after trading to a high of 2,205.01 

and a low of 2,187.84.

	    The SSE-30 index dropped 11.15 points to 4,029.15.

	    DBS Securities analyst Wu Jian said the A-share market remained sluggish amid a lack of fresh leads, adding that he is expecting the composite index 

to remain within a range of 1,950-2,200 points.

	    Domestic securities newspapers have recently published a series of commentary articles arguing that the composite index could soon rise to 2,400 points, on the basis that the government's expected plan for the flotation of state shares in listed firms is in fact a positive lead, that the government remains committed to supporting the market and that the economy remains strong.

	    Wu said he believes such comments are "nonsense", adding that the government is always committed to supporting the market and the current 

economic environment is not much better than last year.

	    There is also little reason to suggest that the flotation of state shares could boost share prices, since the flotations will inevitably enlarge the supply of listed shares, he said.

	    He added that A-shares are already trading at around 60 times earnings, leaving little scope for further gains, and although there is still a large supply of liquidity available for investing in shares, there is no unanimity about the market's direction.

	    If an institution sought to push prices higher, selling pressure would quickly increase, he said.

	    Nonetheless, the large supply of liquidity should limit downside risk, he said.

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