BEIJING, June 29 -- China's domestic A-share market outmaneuvered the sharp falls on global equity markets recently, and should continue to be a defensive play for investors, said a senior investment banker in Hong Kong.

    ¡°A shares have outperformed and are much more defensive than other Asian markets and are the best-performing in Asia and the world,¡± said Jing Ulrich, chairwoman of China equities at JP Morgan & Chase Co.

    ¡°This trend may continue for the rest of the year,¡± she said.

    The Shanghai A-share Index is up 38 percent so far this year, following several years of being one of the worst-performing stock markets in Asia.

    By comparison, the Dow Jones Industrial Average is up only 2 percent, and Japan¡¯s Nikkei 225 is down 7.4 percent. Concerns over interest rate hikes and rising commodities prices sparked a global sell-off of equities in May.

    Ulrich said the success of yuan-denominated A shares, which can only be bought by locals and select foreign investors, is due to a number of factors.

    First, the market cannot be shorted because of local securities regulations. Second, only about 1 percent of A shares are owned by foreign investors, which protects the market from the heavy sales by hedge funds seen throughout the rest of the world in recent weeks. Finally, local investors have started buying more A-share mutual funds, which support the market.

    She added that the performance of the A-share market shouldn¡¯t be impeded by the recent lifting of a ban on initial public offerings.

    Earlier this month, China CAMC Engineering Co. became the first company to list on a domestic exchange since a moratorium on local listings was imposed in early 2005.

    China suspended domestic IPOs and other fund-raising on its Shenzhen and Shanghai exchanges while its listed companies converted their nontradable stock.

    Now, more than 70 percent of the country¡¯s 1,400 listed companies have either disclosed restructurings or completed deals with existing shareholders to make their share capital fully tradable.

    Ulrich said the recent listing of Bank of China on both the H-share and A-share market signals that quality Chinese firms will start heading back to the domestic exchanges. H shares are Hong Kong-listed shares of firms registered and based on the mainland.

    In May, Bank of China sold US$11.2 billion worth of shares in Hong Kong, followed by a US$2.5 billion offering in Shanghai in June.

    ¡°We are now seeing leading companies going to the A-share market and the new A-share IPOs performing very well,¡± said Ulrich. ¡°This is important because this gradual return to the domestic market gives investors access to better quality names,¡±