China's B-shares skyrocketed yesterday, reaching the maximum 10 percent upper limit by mid-day, effectively ending trading. Last week Chinese authorities said they would allow domestic investors to buy any of its 114 listed B-shares.
Following the announcement, securities firms in Taiwan have been scrambling to set up representative offices in Shanghai, although Taiwan restricts financial institutions from making direct investments in China.
PHOTO: AP
China's newly deregulated B-share market may attract more Taiwanese investment in the future, analysts said, although local traders have already been involved in China's stock market for some time.
"Taiwanese investors have been active in the [B-share] market for a long time," said Chen Hong (
Taiwanese securities firms with strong presence in China include Masterlink Securities Corp (元富證券), Core Pacific-Yamaichi Ltd (京華山一) and Capital Securities Corp (群益證券), all of which operate representative offices there, according to the Central News Agency.
More than 500,000 accounts were opened across the Strait over the past two days. Analysts believe that the surging market may allow stockbrokers from Taiwan access to the B-share market, although they will have to wait until Taipei lifts the current ban.
It is anticipated by some that the market will rise further as investors shift investments from the A-share market, where nearly 1,100 companies are listed. Last year, the A-share market had an average daily turnover of 25 billion yuan, while the B-share market had an average daily turnover of 300 million yuan.
"Everybody expects the market to go up by 50 percent or more," said Chen Hong, a China analyst for Fortis.
William Overholt, head of strategy and economics at Nomura International (
"Soon it will be possible for large numbers of Taiwan joint ventures to list in Shanghai, which is a great advantage both financially and in terms of getting local political color and protection," he said.
But as the investors jump into the B-share market, the A-share and B-share markets may move in opposite directions before moderating.
"Fundamentally, it does open up an avenue for investors," said Grant Chan, an analyst who tracks B shares for Lehman Brothers in Hong Kong. "Earnings multiples of the two markets may converge in the middle."
Observers, however, say it will take some time before China allows foreign individual investors to participate in the A-share market, following the example set by Taiwan.
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