MAINLAND stock exchanges have issued notices banning domestic investors from buying new B shares. When first launched, B shares were originally intended only for foreign investors. But since 1994, an increasing number have fallen into domestic hands helping bolster turnover on Shenzhen and Shanghai's lucklustre exchanges. Analysts estimated that in recent months, domestic investors accounted for about 50 per cent of the B-share trade in Shanghai, and 70 per cent of Shenzhen. In separate notices published in mainland financial newspapers yesterday, the two exchanges said with immediate effect, those who owned B-share accounts could only sell down their holdings, but could not buy any new shares. The exchanges said until all shares were disposed of, they would continue to enjoy the rights of B-share investors. Analysts said the order would deal a heavy blow to both B-share markets and could drive the Shanghai index to record lows. 'Foreign investors have been lukewarm about the shares, and now they are keeping out the domestic investors. The B-share market might as well be dead,' one foreign analyst said. The notices reaffirmed a China Securities Regulatory Commission (CSRC) directive a few months ago banning the opening of new B-share accounts by mainlanders. But the directive did not say those holding existing accounts should stop trading B shares. The latest notices are more stringent as they are intended to force domestic investors to reduce their holdings. Foreign investors, disappointed with the results and poor disclosure standards of B-share companies, generally have dumped B shares at the slightest sign of price rises. Except for short rallies in April and June, B shares have traded at historical lows. Analysts said the latest move would further dampen the markets when they open tomorrow. In Shanghai, the B-share index closed at 49.346 points on Friday, against this year's high of 54.466 points in mid-June. In Shenzhen, the B index edged down to 87.36 points, against 116.55 in mid-June. Analysts said the clampdown came because Beijing authorities - especially the People's Bank of China and the State Administration of Foreign Exchange Control - were worried by the outflow of hard currency triggered by massive purchases of B shares by domestic investors. A CSRC official said the crackdown was in line with regulations on B-share trading previously issued by the State Council. The regulations stated only foreigners, residents of Taiwan, Hong Kong and Macau and mainlanders living abroad could buy these shares, which are denominated in US dollars in Shanghai and Hong Kong dollars in Shenzhen. The official said the idea of allowing listed companies to issue B shares was to attract foreign capital to promote the domestic capital markets. 'We want to liven up the B-share market through various measures,' he said, but did not elaborate. The official criticised the Shenzhen exchange for allowing large numbers of domestic investors to open B-share accounts a few months ago, triggering unusual price movements. 'This does not help in the healthy development of B-share market, and adversely affects the management of the country's foreign exchange,' he said.