Shanghai shares off lows after heavy losses on institutional sales

SHANGHAI (AFX-ASIA) - Share prices were coming off their lows after sharp morning losses seen on a burst of institutional selling, dealers said.

They said the selling may have been triggered by news that the China Securities Regulatory Commission has issued rules requiring securities companies to separate investors' share trading deposits from their own funds 

from the beginning of next year.

Although the rules are part of long-term moves to reduce the use of these trading deposits for proprietary investment by securities firms, some institutions may have seized on the news as an opportunity to drive share 

prices lower, triggering retail selling and thus creating opportunities to expand their positions, they said.

At 2:35 pm, the B-share index was down 0.90 points at 220.00, while the A-share index was down 16.92 points at 2,283.87.

One dealer at a foreign securities firm said the B-shares' sudden and sharp declines late in the first session and early in the second may have been triggered by the publication in domestic securities newspapers of CSRC 

rules requiring securities companies to stop using investors' share trading deposits for proprietary investment by the beginning of next year.

He said the new rules are unlikely to have a significant impact on A- or B-share market liquidity but may have provided institutions with a pretext for driving share prices lower.

He added that institutions are generally aware of policy initiatives several weeks before they are announced in official securities newspapers and the publication of these rules is unlikely to have had a genuine impact on institutional investor sentiment.

"But the institutions can just take advantage of this news (to push prices lower)," he said.

Shenyin & Wanguo Securities analyst Yan Dinggong estimated that the total value of individual investors' share trading deposits held by securities companies may amount to 200-300 bln yuan.

A report in the Guangzhou Daily said securities companies were making proprietary use of 2.3 pct of these share trading deposits at end-2000, down from 10.1 pct at the beginning of last year.

Yan said he believes securities companies are still making substantial use of investors' share trading deposits, adding that the figures cited in the Guangzhou Daily appear to be too low.

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