CHINESE securities expert Professor Li Yining says foreign investment funds should be allowed to buy A shares, now sold only to mainland investors, on the nation's two stock markets, according to a report in the official China Securities newspaper. Professor Li, head of the drafting team for China's first securities law, said such a move would give stock markets a welcome boost, but that detailed regulations were needed to protect small investors. ''This is a good thing, but the side effects are very clear,'' Professor Li was quoted as telling a meeting in Shenzhen. He said that investors could be hurt if large foreign investment funds tried to drive up the market and then take profits. To prevent this, regulations should be drafted stipulating strict conditions for disclosure of stakes held and setting long time-frames for sales of a large volume of stocks. Foreign investors are now allowed to buy only B shares, issued by a limited number of companies. This market has been hampered by poor disclosure by listed companies and shoddy listing and trading procedures, say foreign brokers. It is not clear how much support Professor Li has for his proposal. Last April, he proposed that Chinese investors be allowed to buy B shares to stimulate trading in that market. Stock regulators quickly denied there were plans for such a move. China's three-year-old stock markets in Shanghai and Shenzhen have slumped since Beijing tightened credit to cool the economy last June. During the meeting, Professor Li said that the Government's shares in state firms would not be transferable on stock markets for the time being, although this was the eventual target of reforms. Meanwhile, Shanghai No 9 Department Store plans to list 20 million A shares on the Shanghai stock exchange on February 24. The issue will be at five yuan, with a total of five million shares for individual investors and the rest for institutions. A company official said proceeds would be used mainly to invest in construction of a shop to sell car parts in Shanghai. Individual-held shares make up 25 per cent of the firm's enlarged share capital of 50 million yuan (about HK$43.2 million), institutional shares 15 per cent and state shares 60 per cent. In a statement published in the Shanghai Securities News, the company predicted after-tax earnings per share of 0.3774 yuan this year. It reported after-tax profits of 11.7 million yuan for the first 11 months of 1993, compared with 8.17 million for the whole of 1992. The company expects 1994 net to reach 18.87 million yuan. The department store is one of 11 companies that will make its debut on the Shanghai stock market on February 24. They will list a total of 165.85 million yuan worth of new shares.