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Saturday 14 November 2009
Speculative money propels B shares in catch-up play
The mainland’s foreign-currency B shares rose yesterday amid an influx of speculative capital as analysts cautioned investors of a boom-to-bust scenario.
Speculative money propels B shares in catch-up play
Daniel Ren in Shanghai 14 November 2009
The mainland’s foreign-currency B shares rose yesterday amid an influx of speculative capital as analysts cautioned investors of a boom-to-bust scenario.
All B shares rose on the Shanghai and Shenzhen exchanges amid investor belief that the US and Hong Kong dollar-denominated stocks were good buys as they catch up with the A-share rally this year.
The Shanghai B-Share Index rose 21.619 points or 9.4 per cent to 251.192, its highest close in 18 months. The Shenzhen B-Share Index climbed 45.384 points or 7.9 per cent to 622.813.
Both indices posted their biggest single-day gain since September last year, with most of the about 100 stocks hitting the 10 per cent trading limit.
“The B shares are trading at a huge discount to their A-share counterparts,” TX Investment Consulting analyst Qiu Yanying said. “Some speculators sniffed out investment opportunities in the slumbering market but the rally won’t last long because most investors are here to chase quick bucks.”
In Shanghai, B shares are denominated in US dollars while Shenzhen B shares are traded in Hong Kong dollars. Turnover on the Shanghai exchange surged to US$2.23 billion, nearly triple the value a day earlier.
Analysts said expectations of a stronger yuan provided a catalyst to the surge in B shares, which made them cheaper than their yuan-denominated counterparts.
B shares have long been a festering issue as Beijing developed the capital market. The B-share market was created in 1992 to help some state-owned firms raise foreign currencies to fund expansions.
At the time, only overseas institutions and residents were allowed to buy B shares.
Amid a lack of buying interest, the regulators allowed mainlanders to invest in B shares in 2001, only to see a boom turn to bust in four months as foreign funds took advantage of the rally to exit, leaving thousands of mainland investors high and dry.
The China Securities Regulatory Commission started to consider a merger between the A and B-share markets in the late 1990s but has yet to implement the plan. To date, some B shares are trading at a more than 50 per cent discount to their A-share counterparts.
The hefty gain in the B-share market has also triggered fears of capital outflow from the A shares.
The Shanghai Composite Index yesterday edged up 14.702 points or 0.46 per cent to 3,187.647.
“Many investors realised that B shares are much cheaper now,” Haitong Securities analyst Zhang Qi said. “In the short term, it won’t be surprising if more investors convert yuan to foreign currencies to bet on the B stocks. However, volatile trading will dominate the market soon.”
The central government further deregulated foreign exchange services this week, giving the B-share market a shot in the arm. Non-financial institutions are now allowed to offer foreign exchange services to mainlanders.
A mainlander can now exchange a maximum of US$5,000 of foreign currency per day.
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Speculative money propels B shares in catch-up play
Daniel Ren in Shanghai
14 November 2009
The mainland’s foreign-currency B shares rose yesterday amid an influx of speculative capital as analysts cautioned investors of a boom-to-bust scenario.
All B shares rose on the Shanghai and Shenzhen exchanges amid investor belief that the US and Hong Kong dollar-denominated stocks were good buys as they catch up with the A-share rally this year.
The Shanghai B-Share Index rose 21.619 points or 9.4 per cent to 251.192, its highest close in 18 months. The Shenzhen B-Share Index climbed 45.384 points or 7.9 per cent to 622.813.
Both indices posted their biggest single-day gain since September last year, with most of the about 100 stocks hitting the 10 per cent trading limit.
“The B shares are trading at a huge discount to their A-share counterparts,” TX Investment Consulting analyst Qiu Yanying said. “Some speculators sniffed out investment opportunities in the slumbering market but the rally won’t last long because most investors are here to chase quick bucks.”
In Shanghai, B shares are denominated in US dollars while Shenzhen B shares are traded in Hong Kong dollars. Turnover on the Shanghai exchange surged to US$2.23 billion, nearly triple the value a day earlier.
Analysts said expectations of a stronger yuan provided a catalyst to the surge in B shares, which made them cheaper than their yuan-denominated counterparts.
B shares have long been a festering issue as Beijing developed the capital market. The B-share market was created in 1992 to help some state-owned firms raise foreign currencies to fund expansions.
At the time, only overseas institutions and residents were allowed to buy B shares.
Amid a lack of buying interest, the regulators allowed mainlanders to invest in B shares in 2001, only to see a boom turn to bust in four months as foreign funds took advantage of the rally to exit, leaving thousands of mainland investors high and dry.
The China Securities Regulatory Commission started to consider a merger between the A and B-share markets in the late 1990s but has yet to implement the plan. To date, some B shares are trading at a more than 50 per cent discount to their A-share counterparts.
The hefty gain in the B-share market has also triggered fears of capital outflow from the A shares.
The Shanghai Composite Index yesterday edged up 14.702 points or 0.46 per cent to 3,187.647.
“Many investors realised that B shares are much cheaper now,” Haitong Securities analyst Zhang Qi said. “In the short term, it won’t be surprising if more investors convert yuan to foreign currencies to bet on the B stocks. However, volatile trading will dominate the market soon.”
The central government further deregulated foreign exchange services this week, giving the B-share market a shot in the arm. Non-financial institutions are now allowed to offer foreign exchange services to mainlanders.
A mainlander can now exchange a maximum of US$5,000 of foreign currency per day.
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