Shanghai A-shares close slightly higher; B-shares sharply higher

SHANGHAI (AFX-ASIA) - A-share prices closed slightly higher led by gains in several index heavyweights, dealers said.

	    While there was little fresh news to trigger gains in large-cap shares, analysts said the buying may have been supported by general hopes that large-caps could trade at higher price-to-earnings ratios, adding that the shares' PE ratios remain relatively low.

	    Some analysts said sentiment was also boosted by the strong debut of Beijing UFsoft on Friday, which may have triggered hopes that other hi-tech and small-cap shares could trade at higher PE ratios.

	    While A-shares appeared ripe for a correction following several days of gradual gains, hopes of a boost to liquidity once the government proceeds with expected plans to allow the launch of open-ended securities funds continued to underpin sentiment, they said.

	    B-share prices closed sharply higher, at another record high close, amid strong 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 gained 8.98 points or 0.39 pct to 2,305.68 on turnover of 17.05 bln yuan after trading between 2,305.84 and 2,295.61.

	    The SSE-30 index dropped 20.81 points to 4,001.90.

	    The B-share index closed 6.96 points or 3.33 pct higher at 215.88 after trading between 215.90 and 209.87.

	    The composite A- and B-share index closed 10.22 points or 0.46 pct higher at 2,213.59 on turnover of 21.68 bln yuan after trading to a high of 2,213.75 and a low of 2,202.74.

	    Qinghai Securities analyst Yan Qing said the strong debut of Beijing UFsoft on Friday points to strong underlying confidence, and has triggered hopes of further gains in new, small-cap and hi-tech shares.

	    On Friday, Beijing UFsoft's shares rose 330 pct to close at 92 yuan, 161 times the company's 2000 earnings per share, and the highest ever price for an A-share.

	    The company's shares closed down 6.05 yuan at 85.95 on 5.4 mln shares.

	    "Although new, small-cap and hi-tech shares are already very high, the high price of UFsoft may have created scope for further gains," Yan said.

	    However, Guotai & Jun'an Securities analyst Li Wei said it remains unclear whether Beijing UFsoft's debut has given a significant boost to other shares.

	    Beijing UFsoft has only 25 mln traded shares, and since its volume on Friday amounted to 21 mln shares, institutions are now likely to have built large enough positions to control the price of the stock, he said.

	    "The stock's high price, currently the highest in the domestic stock market, provides a (positive outlook) for investors, but genuine buying was thin today."

	    Nonetheless, Qinghai Securities Yan said Beijing UFsoft's strong debut may also pave the way for higher prices in subsequent IPOs, and may also lead to an increase in fund-raising activities, as companies see strong demand for new shares.

	    While there may be some pressure for A-shares in general to undergo a correction following several days of sustained gains, downside risk appears limited amid expectations that the government will soon allow the launch of open-ended securities funds, he said.

	    Investors have also become less concerned that the expected launch of a policy of floating state shares in listed firms will have a significant negative impact on the market, he said, adding that he expects the composite index to trade within a range around 2,200 points.

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