B Shares Fall on First Day after Ban

B Shares Fall on First Day after Ban

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China's B shares spent International Children's Day quietly Friday, despite people's expectation of a storm of fresh funds when the government lifted a three-month ban to free more local funds into the hard currency market.

Some analysts predicted the day would be a D-day for local investors, when restrictions on buying stocks with foreign exchange deposited after February 19 was finally removed.

It would add newcomers to the first batch of local buyers, who were allowed into the market on February 28 with foreign exchange deposited before February 19.

They have bought actively over the past few months on hopes that the coming June would trigger a new bullish rally of B shares on surging market liquidity.

"But after the strong rally, profit-taking pressure also mounted, leading to yesterday's fall," said an analyst with CITIC Securities.

The Shanghai B-share index closed off 7.841 points at 231.890.

Shenzhen's B-share index also slid 15.84 points to finish at 409.67 on moderate turnover.

Investors were taking to the sidelines, carefully watching over the moving trend, the analysts said.

However, in spite of the fall, B shares are mostly likely to rise again in the near term as market sentiment remains high, he said.

The continuous interest rate cuts for forex deposits and the limited investment channel have also pushed more locals to enter the stock market for higher returns.

Local investors are still lining up in front of banks to transfer money into B-share accounts, though the scene is hardly comparable to the first opening in February.

The B-share indices rose sharply on February 28, with most of the 114 B shares surging to their daily trade limit of 10 per cent.

Shanghai's B-share index has soared a staggering 188 per cent and Shenzhen's 233 per cent since the reform.

The over-demand for B shares would continue to exist in the medium term, analysts said.

An analyst with a foreign brokerage in Shanghai predicted that another US$1-2 billion in funds would flow into the B-share market in the coming few weeks.

An estimated US$3-5 billion in funds had already entered the market since February, he said.

China's individual foreign exchange deposits were US$74.6 billion by the end of April.

The number of B-share accounts has tripled to more than one million from before the opening.