B shares ended lower for the third straight day while A shares gained further ground.

The Shanghai B-shares index inched down 0.11 percent to end at 220.705 yesterday as turnover slipped 10 percent to a moderate US$329.33 million.

The Shenzhen B-share index also shed 0.97 percent, or 3.66 points, to 375.20 on turnover of HK$1.51 billion (US$194 million), which has shown little change.

Heilongjiang Electric Power Co topped the fallers list in Shanghai yesterday as retail investors sold blue chips which had booked decent gains over the last month.

The power generator saw its shares fall 2.15 percent to end at US$0.910 after surging 24 percent last month along with the market rally.

Shanghai B shares have slipped about 8 percent while the laggard Shenzhen bourse is down nearly 12 percent since Friday, when China allowed foreign exchange savings deposited with banks after February 19 into the B-share markets.

Brokers said fresh capital failed to materialize as expected. And until profit-taking pressure eased, local punters bulked at buying into still sky-high markets.

B shares have staged a bullish rally since the government permitted locals with foreign exchange deposited before February 19 into the counter three months ago.

The average price to earnings (PE) ratio is now at more than 40 times in B shares, analysts said.

Before the reform the PE ratio was less than 20.

The government allowed more fresh funds into the market last Friday, but investors were much calmer this time and there were not as many newcomers as expected.

"Some investors seem to be losing patience waiting for new investors to come in and buy, so they chose to pocket gains and stay on the sidelines," an analyst said.

Brokers also said the advancing mainland-linked stocks on the Hong Kong markets also helped take the shine off the B-share performance by luring money away.

But a further market rally could happen in the near term after the correction as market sentiment remains robust.

Following the three-day correction, the downside for both indices is now seen as limited, although the markets could still dip further this week, they said.

The correction would also create new opportunities for the newcomers, an analyst with China Securities said.

Already, the market correction appeared to have started attracting buyers yesterday.

"We are seeing less profit-taking on the market after two days of sharp fall, and some retail investors are buying bargains," said an analyst with Guotong Securities.

Domestic A shares, off limits to foreign investors, ended a shade higher as a six-day market rise helped improve market sentiment, brokers said.

The Shanghai composite index rose 8.208 points to close at 2,234.987, repeatedly clinching new highs during the session.

The Shenzhen composite sub-index also advanced 5.40 points to 4,810.07.

A share turnover in Shanghai was up to 14.12 billion yuan (US$1.7 billion) and that in Shenzhen was 9.58 billion yuan (US$1.15 billion) yesterday.

Shares of companies that have both H shares and A shares listed continued to soar yesterday.

Gains were also seen in small-cap counters, which, with potential for asset restructuring, helped extend the market rises.

The Dow Jones China 88 Index increased 0.42 point to close at 178.37 yesterday.

The Dow Jones Shanghai Index gained 0.71 point to end at 258.97.

The Dow Jones Shenzhen Index grew 0.17 point to finish at 252.75 yesterday.

(China Daily 06/06/2001)