B-share investors left out in the cold
China has expanded its controversial sale of state shareholdings to include firms with shares freely open to foreign investors but, as feared, those B-share stockholders will not receive any compensation.
This became clear yesterday when property developer China Vanke and bicycle maker Shanghai Forever - both trade in A and B shares - were included in a new batch of 21 firms to join the reform.
Shenzhen-listed Vanke has offered its A-share investors seven put warrants for every 10 shares held as compensation, while Shanghai-listed Forever is offering five shares for every 10 held.
The two firms' snubbing of B-share holders from the compensation packages could be an indication for similar resolutions by other B-share - and even H-share - firms, an issue that earlier rules from the central government had failed to address.
The latest move pushed mainland stock markets down, with the Shanghai Composite Index - which includes A and B shares - sinking 1.44 per cent. The Shenzhen index tumbled 1.51 per cent.
B shares of Vanke and Forever yesterday fell 4.64 per cent and 0.4 per cent, respectively. Their A shares were suspended pending votes by shareholders on the compensation proposals.
Analysts said B-share investors had been excluded because accumulated losses in the B-share market were much smaller. The combined market capitalisation of more than 100 listed B-share firms is a mere fraction of the 3.27 trillion yuan A-share market.
In August, regulators outlined a programme to convert more than US$250 billion of mostly state-held shares to tradable stock aimed at easing a protracted stock-market slump in the biggest reform of its fledgling capital markets since they were established in the early 1990s.
B shares, trading in US dollars in Shanghai and in Hong Kong dollars in Shenzhen, were introduced as a means for foreign investors to enter the Chinese markets. The initial enthusiasm dwindled as the mainland further opened its economy and regulatory clampdowns revealed rampant corporate mismanagement.
To try to salvage the situation, the B-share markets were opened to domestic investors in February 2001, but the move has had little success.
'The B-share market is dead. But whether it will merge [with the A-share market] or shut down, is uncertain,' Everbright Securities analyst Zhu Haibin said.
