Liquidity worries hold down mainland shares

Chinese mainland stocks ended slightly higher on Thursday, despite a slump in Shanghai B shares amid worries over tight liquidity and stepped- up regulation.

The blue- chip CSI 300 index rose 0.35 percent to 3,461.98 points.

The benchmark Shanghai Composite Index added 0.1 percent to 3,248.55 points, while the Shenzhen Component Index climbed 0.28 percent to 10,583.04 points.

The index tracking the dollar- dominated Shanghai B shares tumbled as much as 3.9 percent, before closing 1.7 percent lower, posting its worst day in two months. Shares traded in Shanghai and Shenzhen exchanges in foreign currency are B shares, while A shares are those denominated in yuan.

“The sharp drop in the Shanghai B- share market, is mainly due to investors’ concerns over tight liquidity in the country’s interbank market and stepped- up regulation on domestic financial institutions,” said Yang Weixiao, an analyst with Founder Securities, adding the soured sentiment could spread to the A- share market on the mainland.

Cash conditions tightened on worries the central bank’s quarterly risk assessment at the end of this month would restrict lending in the interbank market.

In addition, the assessment will for the first time include off- balance sheet wealth management products.

Also, global index provider MSCI Inc is seeking feedback from market participants on whether to add Chinese shares to a widely tracked index, a move which could trigger billions of dollars in capital inflows into mainland stocks and ease pressure on its yuan currency.

Sector performances were mixed. Energy shares lagged, while banking and property stocks firmed.