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Christine Chan

The bull run in Hong Kong stocks has not benefited B-share trading on Shanghai and Shenzhen exchanges as previous runs did, traders say.

  Increasing participation by domestic investors was said to be the reason.

  China's B shares, officially restricted to foreign investors, used to follow the direction of Hong Kong stocks.

  B shares are traded in United States dollars in Shanghai and in Hong Kong dollars in Shenzhen.

 A trader with a European brokerage said: 'Foreign investors in B shares used to make reference to the US and Hong Kong stock markets as well as to red chips and China plays before making investment decisions.'   The situation has since changed, as domestic investors have increasingly traded B shares, attracted by their huge discount to the equivalent A shares, denominated in yuan and reserved for domestic residents.

  The trader estimated that mainland-based trades could make up to 90 per cent of the overall trades in the market.

  'The more involvement by domestic investors in the B-share market, the less dependent it will be on Hong Kong stocks,' she said.

  Foreign investors still in the market were either pension funds or players tending to hold Chinese shares for the long term.

  'These investors are positive about China's long-term economic outlook,' she said, adding that there was a rise in foreign investment in China in the first seven months of the year.

  She said the B-share market would now be more affected by A-share markets rather than the Hong Kong market.

  Despite attempts by Beijing to keep mainland residents out of the B-share market, they have shown few signs of heading for the exits.

  While Hong Kong stocks rose 1.9 per cent yesterday, the Shenzhen B-Share Index edged up 0.53 per cent to close at 90.72 points, and the Shanghai B-Share Index gained 0.03 per cent to 49.08 points.



B shares miss bull charge