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Reform Talk Lifts Gloom Over Market
The long-awaited reform in the stagnant Chinese B-share market has heightened investors' confidence and lifted market sentiment, nurturing long-term benefits to both B-share firms and inves1tors.
A series of market expansion efforts will greatly improve the market and inject fresh energy into the pool, said experts.
The third Chinese company to conduct a B-share initial public offering (IPO) this year, Shandong Zhonglu Oceanic Fisheries Co began placing 120 million B shares at HK$1.93 each last week.
The fishing company was preceded by Foshan Huaxin Packaging Co, which placed its shares last month and made its debut on Thursday in Shenzhen, listing 130 million B shares.
Insiders said there will be more B-share IPOs this year and a number of B-share companies with good performance records will be chosen to issue A shares.
Recently, B-share company Changyu announced that it will issue up to 40 million A shares, making the company the first to issue A shares after a B-share listing.
The move signals the recovery of B-share companies in funding ability, analysts said.
Many Chinese companies had avoided issuing B shares because the hard-currency market had been in a slump for years as the profit/earning (P/E) of B-share companies was only one-third of the average A-share level.
A share issuing of B-share firms will broaden their financing channel, increasing confidence among investors and heralding higher return.
Moreover, the government has delivered a package of market-friendly policies recently. The package includes allowing the expansion of shares for companies that listed both A shares and B shares after three years of consecutive profiting record.
Anthony Neoh, chief adviser to the China Securities Regulatory Commission, also said early last month that the Chinese Government should consider permitting foreign investors to trade A shares on a limited scale.
Neoh said permission would lead to the merger of A-share and B-share markets.
Top Chinese legislators also voiced concern recently for adjustment of the one-year-old Securities Law.
Li Yining, deputy director of the Financial and Economic Committee of the National People's Congress said the legislative body should consider the timetable for opening the A-share market to foreign investors.
Analysts said an A-share and B-share merger is unavoidable and that it is only a matter of time.
They said the market-boosting talks, along with the improvement in the B-share issuing market, is part of the market reform that will gradually narrow the difference in treatment for A-share and B-share firms, lifting investing sentiment in the B-share market.
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