Critics say the low price range will fuel market overheating Bank of Communications, the sixth-largest mainland commercial bank by assets, set the price range for its Shanghai listing at a discount to its Hong Kong traded shares, a policy ensuring first-day gains that critics have cited for helping fuel overheating in the country's stock markets. The Shanghai Composite Index yesterday closed at a record high of 3,710.886 points, up 3.53 per cent from Friday's close. Turnover continued to be high, hitting 182.1 billion yuan, near the record high of 186.7 billion yuan set last Thursday. Investors brushed aside concerns of further monetary tightening measures and the introduction of short selling, betting that there will continue to be heady returns in the market. Critics of the discounted offer pricing contend that its promise of easy money is one of the key drivers of the hot stock markets. Bocom, which is 19.9 per cent owned by HSBC Holdings, set the price for 3.19 billion new A shares at seven to 7.90 yuan each, according to reports, or 7 to 20 per cent cheaper than the HK$8.39 the shares closed at in Hong Kong yesterday. The lender could raise up to 25.2 billion yuan in the sale. Bocom's A-share sale was cut by 20 per cent partly to enable HSBC to more easily restore its stake in the mainland lender, which will be diluted to 18. 6 per cent by the flotation. As a foreign lender, HSBC cannot directly buy A shares to maintain its stake size although it has the right under an agreement to subscribe if Bocom sells H shares. The Shanghai index has risen for the past two trading days since sinking 4.52 per cent last Thursday on news that the economy expanded 11.1 per cent in the first quarter and inflation accelerated last month, sparking concerns over another interest rate rise. The Shenzhen Composite Index rose 3.88 per cent yesterday to 1,042.823 points. 'Last Thursday's market slump failed to scare enthusiastic investors away,' said Tang Xiaosheng, an analyst at Guosen Securities. 'The market is now flush with liquidity, reflected by the surging number of newly opened individual brokerage accounts recently.' A record 282,580 brokerage accounts for trading shares were opened last Thursday, bringing the total to about 90.8 million accounts, according to the China Securities Depository & Clearing Corp yesterday. Newly opened A-share accounts hit about 2.76 million in the first three weeks of this month, dwarfing the 3.08 million new accounts last year and about 850,000 in 2005. The general expectation is that the People's Bank of China will lift interest rates by 27 basis points before the week-long Labour Day holiday from May 1. The other issue hanging over the market is the impending launch of equity index futures for which the China Securities Regulatory Commission announced on Sunday rules governing the trading and clearing of contracts by brokerage firms. Investors will now be able to short the market, betting that it will go down.