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Overseas securities companies can now trade in B shares directly on the country's two stock exchanges in Shanghai and Shenzhen.
The rule, which has gone into effect starting from yesterday, marks another step in the commitment China has made in joining the World Trade Organization to opening its financial sector to foreign investors.
Before the rule change, overseas securities firms were allowed to be indirectly engaged in the B-share broking business by cooperating with a qualified local partner.
The Shanghai and Shenzhen stock exchanges yesterday issued a regulation permitting foreign securities firms to conduct the stock broking business for hard-currency Class B shares and apply for the special membership in the two bourses.
Currently, as many as 41 overseas brokerage companies, through their mainland counterparts, provide brokerage services for trading in B shares. The shares are denominated in US dollars in Shanghai and Hong Kong dollars in Shenzhen.
The new dictate, however, had little impact on the two stock markets, which seemed more preoccupied with the global economic slump.
The Shanghai B-Share Index rose 0.17 percent to 153.93 after hitting a intraday high of 156.25 in the morning session yesterday. The Shenzhen B-Share Index edged up 0.15 percent to 1432.57.
The market's lukewarm response to the deregulation did not surprise analysts.
"It is nothing special or significant for the B-share market to react. It only changes the way overseas securities companies will be doing business. (That is) not of much interest to the investors," said Lu Liang, a China Securities Co. Ltd's investment manager.
Others said the move was largely expected and is in line with China's WTO commitments.
The existing representative offices set up by the overseas brokerages can also apply for special membership on the two mainland exchanges. The membership allows them access to facilities and services offered by the two exchanges.
China is gradually easing its financial sector. Starting this month, foreign investors are being permitted to set up joint-venture brokerage companies. But they can only own one-third of the company. The ventures will be able to underwrite stocks and bonds and offer brokerage services for proprietary bond trading.
The overseas ownership will eventually be raised to 49 percent by 2004.
As of now, 18 domestic brokers and fund management companies have teamed up with foreign financial institutions to establish joint-venture fund management companies.
Only two brokerage firms have signed agreements with their overseas counterparts to set up joint-venture investment banks.
In Shanghai, Sheyin & Wanguo Securities Co. has teamed up with France-based BNP Paribas Asset Management Group and International Finance Corp, while Haitong Securities Co. has allied with Belgium-based Fortis Investment Management Co. and Hua'an Fund Management Co. with JPMorgan Fleming Asset Management.
(eastday.com July 26, 2002)
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