Investor Confidence Recovers in China's B-Share Market

The Shanghai B-share market has been hovering around a three-year high in the final trading week of this century, indicating a strong recovery in investor confidence.

Statistics from the Shanghai Stock Exchange (SSE) show the B-share market index closed at 89.69 points Tuesday after reaching a three-year high of 88.95 points Monday, with Tuesday's turnover hitting US$42.88 million.

Experts said the recovery resulted directly from the preferential polices issued by the SSE on December 15, including lowering B-share trade commissions and fees.

In the final analysis, they pointed to the country's persevering efforts to promote the market as the fundamental cause of recovery.

China's B-share market, which is nominally reserved for overseas investors, used to attract great numbers of overseas investors when the first B-share was listed in 1992. Yet because of the small size and irrational structure, the market had long been sluggish.

In recent years, more and more domestic companies have turned to overseas stock markets like those in Hong Kong and New York, which further narrowed the source of listed companies on the B-share market.

Although the number of B-shares listed on the stock markets in Shanghai, China's leading industrial and commercial center, and Shenzhen, a growing city in south China's Guangdong Province, has increased to 114, most of them are traded at a price lower than their net output value per share.

The sluggishness of the B-share market, which has lasted a long time, has not only undermined its financing function, but also seriously frustrated overseas investors' enthusiasm. Many of them have drawn back their money or taken a wait-and-see attitude.

This year, China has taken a series of measures to propel the resurgence of B-share market, including the buy-back of B-shares at low prices, so as to improve the profitability of listed companies.

In addition, China has loosened the restriction over market accession, permitting more enterprises to invest in the stock market and allowing securities mortgage loan business. The insurance capital, for instance, is allowed to go indirectly into the stock market.

Currently, China is considering establishing Sino-foreign cooperative funds and allowing overseas securities dealers to come to form joint ventures.

All this has laid a foundation for the long-term development of China's B-share market, analysts say.

Zhou Xiaochuan, chairman of the China Securities Regulatory Commission, expressed his confidence recently that China's B-share market is to grow in a healthy manner.

Hu Yebi, general manager of the Singapore-based DBS Asia Capital Ltd., said, China's B-share market has been among the most vigorous securities markets rising in Asian-Pacific region this year.

The B-share market has displayed an outstanding performance in the year 2000, said Julia Zhu, chief representative of Credit Lyonnais Securities Ltd. in Shanghai, expressing her belief that "an optimistic future" is lying ahead.

According to sources with the SSE, the B-share index at the local market has picked up sharply this year. It opened at 37.87 points at the year's start, and then soared all the way to 85.64 points between August and October, creating a rarely seen peak. After a slight drop in November, it finally hit the three-year high of 89.69 points on December 26.

The Shanghai B-share market is expected to go to correct before the new year, analysts predicted, citing Wednesday's plunge of 6. 27 points, or 6.99 percent, in the B-share index, which closed at 83.43 points at the Shanghai market.






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