Foreign Exchange News
- B shares have best week in six years
Date: 14-May-2007 Sources: (Shenzhen Daily)
THE mainland's foreign-currency shares rose to a record in Shanghai on Friday, capping the biggest weekly gain in more than six years, as local retail investors bet the stocks will be merged with the more expensive, yuan-denominated A shares.
Shanghai's index of B shares jumped 3.85 percent to 289.21 Friday, taking the holiday-shortened week's advance to 25 percent. Shenzhen's index, which slid Friday, has surged 16 percent last week. Both completed their best weekly performances since March 2001. May 7 was a public holiday.
'There is a reasonable chance that the merger could happen this year,'' Vincent Chan, an analyst at Credit Suisse Group, said in a research note published Friday. 'With A shares trading at a simple average premium of 100 percent over B shares, we think that this potential development offers arbitrage opportunities.''
'Some people are probably converting yuan into Hong Kong or U.S. dollars to buy B shares, betting they are cheaper than A shares,'' said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai. The rally may be over as the price gap between the two classes of stock narrows, Zhang said.
A merger of A and B shares may proceed once the government completes a program begun in May 2005 to convert over US$200 billion of mostly State-held shares into common stock. So far, 80 of the 86 companies involved have completed their share conversions.
'Once the share reform of these six companies are completed, we do not see any major obstacle left,'' Zhang said.
B shares are traded in U.S. dollars in Shanghai and Hong Kong dollars in Shenzhen.
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