More of China’s B-share companies are set to move their listings to Hong Kong to escape the country’s experiment in foreign-denominated shares.
Of the 107 shares listed in Shanghai and Shenzhen, accounting firm Deloitte reckons there are about 40 that are also listed on the A-share market and could meet Hong Kong’s listing requirements to join the H-share market.
“B-share companies are likely to be very motivated to move to Hong Kong,” said Edward Huang, a strategist at Haitong International Securities. “Companies engaged in businesses like consumer products, real estate and infrastructure, which Hong Kong investors are very familiar with, are likely to be popular with investors as well as underwriters.”
China Vanke, a real estate group, is expected to be the next B-share to make the move to Hong Kong. If successful, the company is expected to become a new member of the Hang Seng property index thanks to its position as one of China’s biggest property developers. Shares in the company have been suspended from trading since December 26, due to what it described as “important matters”. Citic Securities International is reported to be the sole bookrunner of the deal.
Citic declined to comment on Vanke’s deal, but said Chinese investment banks “enjoy advantages” in contributing to such cross-border transactions. The conversion of B-shares to H-shares not only needs investor support, but also the cooperation of mainland and Hong Kong regulators, it added.
Founded in 1992, the B-share market was originally designed to cater to foreign investors, with stocks denominated in US dollars in Shanghai and Hong Kong dollars in Shenzhen. It has very thin market volumes and has had no new listings since 2000. Overall, B-shares account for less than 1% of Chinese brokers’ business.
China International Marine Containers (CIMC) was the first company to quit the B-share market for Hong Kong. The logistics equipment and solutions provider listed in Hong Kong through investor introduction on December 19. Guotai Junan was the sole bookrunner.
With expectations that more companies will follow CIMC’s suit, the market has responded well, with Shanghai’s B-share index climbing 16% during the past month — even as the overall market fell.
“The reform of the mainland’s capital market and the relaxation of the H-share listing requirements will also fuel the prevalent trend of the conversion of B-share companies into H-shares, another major market spotlight in 2013,” said Edward Au, co-head of Deloitte’s China public offering group.
However, Citic argued that not all B-share companies are poised to make the move. Companies should first consider whether their business needs overseas expansion and foreign investors, it said.
Apparently, China’s securities regulator doesn’t want to see all B-share companies migrate to Hong Kong. The Shenzhen bourse has said that companies voluntarily delisting B-shares could relist on the renminbi-denominated A-share market without going through the IPO review process.