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SCMP Reporter

Mainland securities regulators have ordered brokers to stop buying shares for domestic clients with illegal B-share accounts from July 14.

  The order came down yesterday at a meeting for brokerages by Shanghai Central Share Registration and Clearing Co, following instructions from the watchdog China Securities Regulatory Commission.

  The clearing company said that to ensure strict enforcement, adjustments would be made to its computer system enabling it to detect illegal trades.

  A circular issued at the meeting said shareholders of illegal accounts could sell down their holdings but were banned from buying new shares. It did not give a deadline.

  The shareholders are also banned from subscribing to the rights issues made by companies in which they hold shares.

  The purge of illegal B shareholders came after authorities spent more than six months cracking down on excessive speculation and illegal funds in the A-share markets.

  Analysts said the move would hurt more than 20,000 mainlanders on the two exchanges who have opened B-share accounts with Chinese identity cards.

 B shares are, in theory, meant for foreigners and can be opened by those holding foreign passports.

  In the bid to revive the flagging B-share markets last year, the two exchanges and their clearing companies ignored trading rules and allowed tens of thousands of domestic investors to open illegal accounts with Chinese identity cards.

  Accounts opened by mainlanders using foreign passports of friends and relatives are considered legal and will not be affected.

  Analysts said yesterday's move was part of a process launched last September to clean up the B-share markets.

  Shenyin & Wanguo analyst Zhou Xiaoming did not think the purge would hurt B-share prices significantly, as only a small portion of mainland shareholders would be affected.

  'I think more than 70 per cent of the mainlanders trading in B shares these days have legal accounts [which have been opened with foreign passports],' he said.

ILLEGAL TRADING CRACKDOWN CSRC demands trading be limited to 'foreigners' Existing shares can be sold but fresh buys are out Foreign passport-opened accounts not affected 



Screws tighten on B-share deals