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B share rules unveiled
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Liu Fuzhong
THE China Securities Regulatory Commission (CSRC) issued a circular yesterday explaining in detail the rules for mainland residents to trade in the foreign-currency capital market, better known as the B share market, which opens to mainland investors next Monday.
According to the rules, mainland residents will be able to start trading in the B share market on Monday, but only with foreign currency savings deposited on or before February 19. In a move that deals a blow to illegal money trading, the authorities imposed a grace period during which foreign currency savings deposited after the date will be barred from entering the B share market until June 1.
Brokerage houses must apply for licences with CSRC and state foreign exchange control authorities before offering trading services in B shares.
Retaining tight control over foreign exchange outflow, the rules forbid remittance of foreign currency from B share accounts out of the country and bar investors from directly withdrawing cash from their trading accounts.
Analysts say an expected influx of local cash will boost liquidity in the previously stagnant market, which was originally designed for foreign investors.
Prices of the B shares are expected to skyrocket as some US$75 billion in foreign exchange deposits would be freed up for investment in the US$7 billion B-share markets. Greater liquidity should also attract more overseas investors, analysts say.
Industry experts say that the temporary measures and grace period are helpful to smooth transition to opening the capital market. Yet the full convertibility of the renminbi yuan is critical to the merger of the A and B shares markets.
The Shenzhen Stock Exchange reported the largest crowds ever before the B-share account opening counters over the past two days.
Kwon Meng Boon, an old gentleman from Hong Kong, told Shenzhen Daily that he came with all his family to open accounts. He said he is among the many Hong Kong investors hoping to cash in on the burgeoning market.
The exchange rate between Hong Kong dollars and renminbi in the black market stabilized after the rules were published. At one point the rate was jacked up to 110 yuan for 100 Hong Kong dollars as locals rushed to exchange money in a bid to grab a share in the expected bonanza.
China has two types of hard currency B shares, one traded in US dollars on the Shanghai Stock Exchange and the other in Hong Kong dollars on the Shenzhen bourse.
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