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B shares slide as correction continues
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Yang Yunfei
CHINA'S hard currency B shares continued their losing streak last week as investors stayed on the sidelines waiting for a clear sign of market direction amid a deep correction.
Domestic A shares, reserved for Chinese investors, finished lower as concerns about government plans to reduce State-owned shares to raise money for the country's underfunded social security system weighed on the market.
B shares have suffered substantial losses after a long-expected rush of liquidity failed to materialize since June 1, when domestic investors were officially permitted to use foreign currency deposited after February 19 to buy B shares.
The lower-than-expected inflow of fresh capital has greatly dampened investor sentiment and is a main factor that has recently weighed on the market, analysts said.
The B-share markets were also overdue for a significant correction as the prices of many B shares had doubled since the formerly foreigners-only hard currency exchanges were opened to domestic investors in late February.
Pent-up pressure to take profits on the high-flying B shares reached a peak on Monday, causing a dozen counters to reach their daily limit, even though there was no new negative news to trigger the sharp sell-off. A shares also dropped, dragged lower by the plunge in B shares.
Shanghai B shares continued to head south after volatile trading on Tuesday, but Shenzhen stocks ended up nearly two per cent on a technical rebound. A shares also staged a technical rebound after falls in the past week.
B-share prices rebounded on Wednesday as bargain-hunting emerged and some players felt prices had come down enough after a deep correction that kicked in a week ago. Shares of electrical power companies continued their rise helping to push up the overall A share indexes, as domestic punters largely ignored the news that Shenzhen-listed Guangdong Kingman Group would become the second company be be kicked off China's decade-old stock market following in the path of the delisting in April of Shanghai-listed washing machine maker Narcissus Co.
A shares slipped on Thursday as investor sentiment was dampened by the news that the State Council, China's cabinet, unveiled long-awaited regulations aimed at reducing the government-owned shares to raise money for the cash-strapped social security system. The fall in the A-share market spilled over into the 113-counter B-share market, which also ended down at closing although it felt little impact from the government rules to sell State-owned shares.
But market sentiment was not seriously hurt as investors had anticipated the news for a long time.
"We think that State-owned share sales won't be a big problem for the stock market. Regulators' intention is to finance the shortfall in the social security system, rather than to sharply decrease levels of State ownership and inundate the market with shares," said an analyst at China Communications Securities.
B shares rose on Friday after market sentiment was boosted by State media reports that the government had launched a crackdown on illegal foreign exchange dealings, a move analysts said was partly aimed at stemming the flow of "hot money" into Hong Kong to trade H shares.
Pleased by the official crackdown aimed at curbing capital outflow, investors conducted some speculative buying amid expectations that the crackdown would push liquidity back into the B share market. A shares, buoyed by the B-share gains, also ended slightly up.
Over the week, the Shanghai B-Share Index fell 19.06 points, or 8.53 per cent to end at a month low of 204.51.
The Shenzhen B-Share Index shed 7.81 points, or 2.08 per cent to end at 367.39.
As B shares were fragile last week, analysts said that it's too difficult to tell whether a recovery is in the offing this week.
The Shanghai A-Share Composite Index last week fell 12 points to close at 2210.97.
The Shenzhen A-Share Composite Sub-Index ended 36.63 points lower at 4745.38.
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