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Locals bet on Bs
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Yang Yunfei
AS expected, tens of thousands of investors flocked to securities houses to open trading accounts yesterday, the day before China's hard currency B share market was expected to reopen after a week-long suspension.
The decision to open up foreign currency denominated B shares to domestic investors has unleashed a wave of interest in the cheaply valued but tiny market.
“We added 61,439 new trading accounts by 16.30pm today, while 51,254 B share accounts were opened yesterday," said Zhang Zhaoyi at the Shenzhen Stock Exchange yesterday.
B shares, denominated in Hong Kong dollars in Shenzhen and US dollars in Shanghai, were originally reserved for foreign investors, while the more liquid, yuan-denominated A shares are restricted to Chinese investors.
China announced last week that domestic investors with legal foreign currency deposits would be allowed to trade B shares, opening the floodgates to local cash and unleashing a flood of liquidity into the long ignored market.
China's personal foreign exchange deposits reportedly reached US$74.93 billion in January and have been growing at between 20 and 30 per cent, compared with only eight per cent for yuan deposits.
The move to open up the B share market is aimed at boosting liquidity by tapping the growing availability of foreign currency on the Chinese mainland, analysts said.
Eyeing the sharp price gap between A and B shares, hopeful investors have ploughed money into a market with a capitalization of just US$7 billion.
“I haven't a clue about stock markets, but my friends said that I would get hefty returns if I buy B shares and I just want to try my luck," said a woman in her 40s.
As local investors scrambled to obtain foreign currency to open B share trading accounts, the US and Hong Kong dollars soared last week on China's currency black market.
To avoid disruption in the currency markets and a massive sell-off of the renminbi, the authorities have made plain they do not want to see large amounts of black-market currency entering the B share market.
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