LIKE their foreign counterparts, domestic investors tend to favour the Shanghai stock market over Shenzhen's, but the rationale behind the preference differs. Wider representation of China's industries and higher liquidity are reasons foreigners give for their preference for Shanghai. But, ironically, when it comes to talk about Shanghai's appeal to domestic Chinese investors, many consider Shanghai to be far more speculative. ''A stockmarket's attractiveness lies in its standardisation and company fundamentals - as well as its speculative flavour,'' a Shenzhen institution said. Although historic reasons and company mix do count towards mainlanders' liking for Shanghai, analysts say the city's main attraction is primarily because of speculation. ''The higher the speculation in the stock market, the higher the chance for investors to make quick gains from the fluctuations of share prices,'' the Shenzhen institution said. Based on the principle that investments are not made for rational purposes, but for quick gains, Shenzhen is being given a miss by mainland investors because it has a ''higher degree of market standardisation''. Strange, though, because Shenzhen is receiving the most criticism from foreigners who have been complaining about the lack of liquidity and the sub-standard company fundamentals. This, of course, has to do with the two different markets that mainlanders and foreigners are involved in. Shenzhen is confined to A shares, traded in yuan, and Shanghai to B shares, traded in foreign currencies. That Shenzhen is comparatively less speculative - which could be perceived as a plus in foreign investors' eyes - is viewed by mainlanders as a minus. ''The problem with Shenzhen is that its standardisation is too fast, and too good,'' one mainlander said. A securities practitioner said: ''Shenzhen's higher degree of standardisation'' was reflected in the exchange's advanced trading system, which offered auto-matching in the early stages of its establishment. ''In comparison, Shanghai still adopts broker-to-broker trading to a certain extent.'' The call-outs, he said, could lead to higher participation of floor traders and, in turn, big players who would be able to get more information from market gossips. ''The active atmosphere in Shanghai, where institutions take part during the transaction, will boost investments,'' he said. The higher degree of standardisation of the Shenzhen exchange was also reflected in its custodian system. Buy and sell orders in Shenzhen could only be made to a destined brokerage, while orders in Shanghai could be made to any brokerage. This, the practitioner said, would mean a lack of flexibility at the Shenzhen Stock Exchange, although the protection was higher for investors. ''In addition, Shanghai-based securities firms give bigger credit lines to their clients than Shenzhen's . . . this all adds up to Shenzhen's higher degree of standardisation,'' he said. An analyst with a Shanghai brokerage said the investor base at Shenzhen, where institutions accounted for the lion's share, also contributed to Shenzhen's ranking after Shanghai in terms of luring domestic investors. ''Institutions are relatively more stable, and hold shares for the longer term,'' he said, adding that Shanghai's proximity to Beijing would provide it with the fastest and latest news on policies that could affect the market. Domestic investors' liking for the Shanghai market reached a climax recently, when billions of yuan were pumped into it and the Shanghai A index rocketed to highs following the announcement of the rescue plan by Beijing. Shanghai A index gained a whopping 114 per cent last week and Shenzhen's jumped 74 per cent. Turnover at Shanghai was extremely heavy, almost three times as much as Shenzhen last week. Mainland analysts said it would not be appropriate to use the internationally accepted price-earnings (P/E) multiple to weigh mainland stocks. ''You can use P/E for theoretical analysis of the China market, but if you use it for analysing the secondary market, it would not tell the whole picture in China,'' he said. He said mainlanders and foreigners had a variety of views towards stock markets. The difference in viewpoints stems from the different perception and approach to the market: foreigners tend to hold stocks for the longer term, while mainlanders go for the short term. ''China is still far from the stage of using P/E to evaluate the markets,'' an analyst said.