Monday 21 May 2007
In China, land of red-hot stocks, B-shares are white-hot (AFP)
May 21, 2007
These days, Zhang Nin gladly sacrifices her short lunch breaks so she can
queue up at the bank and buy US dollars for local currency. The 24-year-old
marketing executive at a Shanghai wine company needs the money to buy
hard-currency B-shares, which recently have emerged as an even hotter
commodity than the sizzling local-currency A-shares. "I bought some
B-shares on Tuesday and two days later they had risen by about 15 percent,"
she said. "That's amazing, as A-shares I bought three weeks ago only earned
me about 20 percent of profit.
China's stock markets have skyrocketed in recent days and weeks, boosted by
massive inflows of individual investor money.
But while the A-share market has boomed, retail investors have found that
some B-shares issued by the same companies have risen even faster. A-shares
are denominated in the Chinese currency and were originally reserved for
local investors, while previously only foreigners could buy B-shares,
denominated in either US dollars or Hong Kong dollars.
The distinctions between the two have disappeared somewhat as local people
have been permitted to buy B-shares since early this decade, while
foreigners are allowed into the A-share market via qualified foreign
institutional investors. Most of the 110 B-shares are also listed on the
A-share market and they are generally cheaper than their A-share peers,
with an average discount of 20-30 percent, said Zhang Qi, an analyst with
Haitong Securities. "The price disparity of A-shares and B-shares has
always been there," Zhang said.
"But it was only in late April that retail investors suddenly woke up to
find the value of B-shares was low from the past bearish years and started
to speculate on them." The Shanghai B-share Index surged 80 percent in the
month ending Thursday, compared with a 12-percent rise in the benchmark
index in the same period. Turnover Thursday was more than seven billion
dollars, more than double that of Taiwan's market. This sharp risen made it
seem worth the trouble for Zhang, the wine company executive, to reshuffle
her portfolio.
"I think B-shares are 'safer' -- they rise faster and cost less," she said.
"I am considering cutting some lukewarm A-share holdings and moving the
funds to the B-share market." The B-share market was originally established
in an attempt to channel foreign funds into listed firms, but foreigners
have shown little interest. "Foreign investors have better options like the
Hong Kong market if they want to invest in Chinese firms, that's why
B-share market is now dominated by retail investors -- they prefer
inexpensive stocks," said Gui Haoming with Shenyin Wanguo Securities.
The once marginalised B-share market, with a market capitalization merely
two percent of the 2.3-trillion-dollar A-share market, is seeing sharper
rises now, but it may also become a spearhead should a correction come. "I
think some B issues are obviously overvalued as their fundamentals have
barely changed from years ago. We had better be cautious," said Gui. "The
B-share market would be more vulnerable to large swings as most
participants are individuals," he said. Even stock punters like Zhang Nin,
who said her trading decisions were mainly based on the advice of friends,
has become more aware of the risks. "It's too crazy," she said, "there are
so many people in the bank that I usually have to wait more than one hour."
"I'm uncertain whether I shall put more money into stocks."
These days, Zhang Nin gladly sacrifices her short lunch breaks so she can
queue up at the bank and buy US dollars for local currency. The 24-year-old
marketing executive at a Shanghai wine company needs the money to buy
hard-currency B-shares, which recently have emerged as an even hotter
commodity than the sizzling local-currency A-shares. "I bought some
B-shares on Tuesday and two days later they had risen by about 15 percent,"
she said. "That's amazing, as A-shares I bought three weeks ago only earned
me about 20 percent of profit.
China's stock markets have skyrocketed in recent days and weeks, boosted by
massive inflows of individual investor money.
But while the A-share market has boomed, retail investors have found that
some B-shares issued by the same companies have risen even faster. A-shares
are denominated in the Chinese currency and were originally reserved for
local investors, while previously only foreigners could buy B-shares,
denominated in either US dollars or Hong Kong dollars.
The distinctions between the two have disappeared somewhat as local people
have been permitted to buy B-shares since early this decade, while
foreigners are allowed into the A-share market via qualified foreign
institutional investors. Most of the 110 B-shares are also listed on the
A-share market and they are generally cheaper than their A-share peers,
with an average discount of 20-30 percent, said Zhang Qi, an analyst with
Haitong Securities. "The price disparity of A-shares and B-shares has
always been there," Zhang said.
"But it was only in late April that retail investors suddenly woke up to
find the value of B-shares was low from the past bearish years and started
to speculate on them." The Shanghai B-share Index surged 80 percent in the
month ending Thursday, compared with a 12-percent rise in the benchmark
index in the same period. Turnover Thursday was more than seven billion
dollars, more than double that of Taiwan's market. This sharp risen made it
seem worth the trouble for Zhang, the wine company executive, to reshuffle
her portfolio.
"I think B-shares are 'safer' -- they rise faster and cost less," she said.
"I am considering cutting some lukewarm A-share holdings and moving the
funds to the B-share market." The B-share market was originally established
in an attempt to channel foreign funds into listed firms, but foreigners
have shown little interest. "Foreign investors have better options like the
Hong Kong market if they want to invest in Chinese firms, that's why
B-share market is now dominated by retail investors -- they prefer
inexpensive stocks," said Gui Haoming with Shenyin Wanguo Securities.
The once marginalised B-share market, with a market capitalization merely
two percent of the 2.3-trillion-dollar A-share market, is seeing sharper
rises now, but it may also become a spearhead should a correction come. "I
think some B issues are obviously overvalued as their fundamentals have
barely changed from years ago. We had better be cautious," said Gui. "The
B-share market would be more vulnerable to large swings as most
participants are individuals," he said. Even stock punters like Zhang Nin,
who said her trading decisions were mainly based on the advice of friends,
has become more aware of the risks. "It's too crazy," she said, "there are
so many people in the bank that I usually have to wait more than one hour."
"I'm uncertain whether I shall put more money into stocks."
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