SHANGHAI Shenyin Securities (HK) is planning an offshore investment fund of US$25 million for foreigner-held stocks in Shanghai, as the mainland-based brokerage house sees the market growing bigger with better quality counters. The fund, to be launched in January, will mark the first foray of Shenyin's Hong Kong vehicle into investment funds, since its establishment in the territory last year. Shenyin Phoenix Fund Management will be set up by Shanghai Shenyin Securities (HK) and Phoenix Investment Group, an investment house backed by Southeast Asian investors, to manage the open-ended investment fund which targets to eventually raise $40 million in six months. The fund has no intention of seeking a listing. Shanghai Shenyin Securities (HK) managing director Guo Zhenhua said 'it was good timing' to invest in B shares because he expected market capitalisation in Shanghai to increase and resolve the main problem which concerned foreigners - limited liquidity. He expected there would be more than 20 new issues for B shares in Shanghai next year. There are 30 stocks at present. Mr Guo said the quality of newly-listed B shares had been improving. Beijing had also approved enterprises outside Shanghai to issue shares, so more quality companies could go public. 'The recently listed B shares can match H shares in their concepts and sectors.' H shares are also for foreign investors, but they are listed by mainland state-owned enterprises in Hong Kong. Mr Guo said the proposed investment fund would be the first one earmarked for Shanghai B shares, capitalising on Shenyin's expertise in the industry. Shanghai Shenyin, as one of the three biggest brokerages in Shanghai, has been the lead underwriter of more than half of the B-share counters on the Shanghai Stock Exchange. According to Credit Lyonnais Securities, the Shanghai B-share market now has a market capitalisation of $1.66 billion. The fact that foreign investors had rekindled their interest in Shanghai B shares is underscored by the stellar debut of two initial public offerings - Shanghai China International Travel Service and Shanghai Posts and Telecommunications Equipment. Analysts said the counters' low price-earnings multiples and that they were in a growing sector were the main reasons that they were well-received. But analysts were reserved on whether the fledgling stock market had fully recovered from past problems. Mr Guo said a long-existing problem was poor information disclosures, but he said Shanghai had improved and that was highlighted by its lead over the Shenzhen Stock Exchange in wooing foreign investors. The proposed fund will be subject to some investment restrictions. It will not be allowed to take more than a five per cent stake in each stock.
