China's A shares and B shares moved in different directions yesterday.
Hard-currency B shares continued a sharp rally for the fourth straight day, with most stocks surging the 10 percent daily limit on heavy turnover.
Shanghai's B-share index ended up 9.9 percent at 121.328, rewriting the record that was just set on Friday.
Shenzhen's B-share sub-index soared 9.4 percent yesterday to close at 1,238.73.
Volume surged to a four-month high of US$70.4 million in Shanghai and HK$112.1 million in Shenzhen, compared with US$2.9 million and HK$2.2 million on Friday.
B shares have gained 45 percent since last Wednesday, when China opened the doors of the hard-currency markets, previously reserved to foreigners, to domestic investors.
Profit potential led to a flood of domestic investors who sought all possibilities to buy.
But until yesterday, turnover had been slim as B-share holders declined to sell.
Analysts warned that there may be a correction in the near term after the strong rise as profit-taking pressure mounted up.
The Shanghai Securities News also carried a story over the weekend to warn investors to watch out for risks.
"It is normal to see a slump after such sharp rally," said analyst Dong Chen with the China Securities.
He said investors should particularly avoid those with loss-making records.
Analysts said some sellers had checked out yesterday to take profits.
But some said there are still enough new investors to sustain another two or three days of surges.
They said performance of the B shares would be divided as companies with strong fundamentals would continue to rise in the coming few sessions while those with poor corporate results might fall soon.
The Chinese residents were allowed to trade B shares since Wednesday as part of the government's efforts to boost the hard-currency market.
Presently, they hold about US$75 billion foreign exchange deposits at domestic banks.
B shares are much cheaper than domestic A shares. Even after the four-day rally, there is still price gap of about 60 percent between the two counters.
The B-share market has outperformed other Asian markets since early last year on rosy expectation of market reform.
Domestic A shares, however, dropped yesterday after a brief rise in morning trade, ending two days of rebounds as investors took sidelines.
Shanghai's composite index edged down 0.911 points to 1,984.200.
Shenzhen's composite sub-index lost 6.98 points to 4,571.66.
Analysts said the fall was due to lack of new market leads in the bourses and the indices were likely to waver around the current level in the near term.
The Dow Jones China 88 Index lost 0.61 points to finish at 170.40 yesterday.
The Dow Jones Shanghai Index fell 0.21 points to end at 238.76 and the Dow Jones Shenzhen Index slipped 0.76 points to end at 239.04 yesterday.
(China Daily 03/06/2001)
