Reform hopes draw investors to B-shares

B-share markets may soon see a flood of new investment as speculators swoop in to gamble on reforms to the moribund board, experts told the Global Times Thursday.

In total, 845 new trading accounts were opened on B-share markets - where shares are traded in US and Hong Kong dollars - during the week ending January 11, a 93-week high and nearly triple the average number of new accounts opened over the prior four weeks, according to data released by China Securities Depositary and Clearing Corporation Limited (CSDCC), a company supervised by the China Securities Regulatory Commission (CSRC).

In contrast, newly opened A-share accounts during the same week totaled 93,657, up marginally from the 90,271 average seen during the four preceding weeks, CSDCC figures show.

Investors are beginning to take a more optimistic view of the B-share markets now because they want to turn a quick profit on what they see as government efforts to do something about the long marginalized market, Qian Qimin, deputy head of market research at Shenyin & Wanguo Securities, told the Global Times.

In recent months, events have emerged which many have interpreted as signs that long-awaited systematic reforms permitting B-shares to be converted into H-shares may soon be launched. Since companies listed on the B-share market are generally undervalued compared to A-shares or H-shares, investors are positioning themselves now to profit from price spikes following conversion, Qian said.

The first signal of change came in August, when China International Marine Containers (CIMC), a State-owned container manufacturer, issued a filing stating that it was planning to convert its B-shares into H-shares. Four months later, the company staged the first successful B-to-H conversion, a leap which many said could provide a road map which other companies could follow off the illiquid board.

On November 29, 2012, CIMC finished its last day of trading on the Shenzhen B-share market at HK$9.7 ($1.25). Its share price jumped to HK$12.6 when it started trading on the Hong Kong Stock Exchange on December 19. The stock closed at HK$13.64 Thursday.

The swap put the B-share market, which has lost much of its luster in recent years as China's capital market opened, back in the spotlight. Since the end of November, B-share indices in Shanghai and Shenzhen have been steadily on the rise.

After CIMC's move, it was reported that a number of companies listed on B-share markets were at work on plans to take its lead. Guo Shuqing, chairman of the CSRC, said Monday that the commission has created a special team to approve conversion plans. "It seems that the government basically supports such conversions," Qian said. "So, more investors are entering the market looking to speculate."