CHINA'S B-share market is expected to experience a volatile period this year, following a flurry of new market listings and right issues on the mainland. Analysts believe the average price earnings ratio (PE ratio) for B-shares will fall from the current 13 times, to less than 10 in the coming months. ''Although the B-share market is relatively cheap, compared with other markets, investors have to select quality counters cautiously,'' said Mr Edward Chan, research director of Standard Chartered Securities. In the first four months of this year, five B-share public offers were launched in Shenzhen, with one listing in Shanghai. At least five new issues, including Shenzhen Gintian, Shenzhen Yili Mineral Water, Shenzhen SEZ Real Estate, Shanghai Outer Gaoqiao Free Trade Zone, and Shanghai Liujiaqiao, will be in the pipeline soon. The total flotation size is estimated to be more than JPY1 billion (about HK$1.35 billion). ''The fund managers will be more interested in the new issues, rather than the existing B-shares. ''But looking ahead into 1993, both sentiment and the trading environment are expected to improve. ''We should see the strong fundamentals and profit growth potential flowing into share prices in both the Shanghai and Shenzhen stock markets,'' added Mr Chan. The development of China's stock market is seen as a milestone for the country's economic reforms. On one hand, Beijing intends to quickly promote the market up to the international standard, while, on the other hand, it takes a watchful step to eliminate any possibility of making mistakes. Following years of wrangling between the conservatives and reformists, Beijing finally granted the go-ahead to sanction two securities exchanges in Shanghai in late 1990 and Shenzhen early in 1991. The markets opened to foreigners via the issue of B-share last year. Shanghai Vacuum was the first B-share listing and was floated in Shanghai in February last year. China Southern Glass followed to list on the Shenzhen Stock market in the same month. Last year, Shenzhen and Shanghai issued a total of nine and 10 new B-shares, respectively, raising a total of JPY4.6 billion. As of March 19, the B-share market in Shenzhen recorded a market capitalisation of JPY3.9 billion, with JPY5.3 billion in Shanghai. According to a report conducted by Standard Chartered Securities, share prices on both exchanges witnessed sharp rises during the first few months of trading, mainly because of the limited supply of shares. Demand, on other sides, was boosted by the rapid increase in accumulated personal savings and the lack of alternative investments. But over the past few months, the market, particularly the B-share investment, has entered into a consolidating stage. The biggest problem deterring foreign investors is the slow adoption of international reporting procedures and accounting standards. Recently, a new regulatory body, the Securities Commission, was set up. The industry believes that this will strengthen the regulatory and operational management of the stock markets at the international level. ''Many Japanese and US fund managers are interested in the B-share investment in China. They are waiting for the opportunities,'' said Mr Chan. Standard Chartered's report estimates that about 34 China and China-related funds launched by professional investment managers have been established. They have raised a total of more than US$1.6 billion, which exceeds the total market capitalisation of B-shares of about US$1.3 billion, in both Shenzhen and Shanghai. However, due to the difficulties being seen in settlement, the exchange risk and the stock selection, a sizeable proportion of them are now put in certain Hongkong listed China-concept stocks, or even cash, the report adds.