Aug 21, 2012
By Zhang Dian

An article in today's China Securities Journal quotes "management-level people" as saying that China's regulators now have a clear idea of the best way to move ahead with efforts to find a "way out" for China's thinly traded B-share market. The anonymous source also told the newspaper that moves to solve the B-share problem had already been fast tracked and that new innovative policies will be released soon.

The newspaper quotes market insiders as saying that earlier expectations that the A-share and B-share market would be merged, by directly transferring B-shares to the A-share market, are unlikely to be realised.

Unlike A-shares which are traded in RMB and are largely closed to foreign investment, B-shares refer to those traded in either US dollars (Shanghai) or HK dollars (Shenzhen). The trading volume on the B-share market is tiny compared to the main boards of the Shanghai and Shenzhen stock exchanges and the number of companies issuing B-shares is also very small when compared to the A-share market.

From mid-2010, the B-share index surged on rumors that the thinly traded boards would be mergered with either the dominant A-share market or with a planned international board. The rumors helped to drive the Shanghai B-share index up 26 percent over the 12 months through to April 2011 when the market peaked.

The paper offered three potential approaches to dealing with the B-shares.

The first is that companies that have issued both A-shares and B-shares, can transfer their B-shares to become H-shares, that is, list them on the Hong Kong stock exchange.

The second avenue is for companies to buy back their B-shares and thus gradually decrease turnover on the already thinly-traded board. Some companies have already begun to buy back their B-shares.

The third option is to allow companies that wish to delist from the B-share market the opportunity to list again on the A-share market, if they meet the relevant standards.

The trading volume on the B-share market is tiny compared to the main boards of the Shanghai and Shenzhen stock exchanges and the number of companies issuing B-shares is also very small when compared to the A-share market.

Links and Sources
China Securities Journal: 解决B股问题思路明确