* Zhejiang Southeast Electric Power to convert B shares to A
shares - sources
* Will necessitate decision on how to handle foreign owners
of B shares
* Policy could allow for conversion of other B shares to A
* Announcement likely before Feb. 9 - company source
By Pete Sweeney
SHANGHAI, Jan 28 A Chinese company is preparing
to migrate its dollar-denominated B shares to the mainstream
A-share board, two sources at banks advising on the deal told
Reuters, signifying the beginning of a migration that could see
individual foreign investors owning yuan-denominated shares in
Chinese equities for the first time.
A source at China International Capital Corporation (CICC)
and another source at Morgan Stanley's Chinese joint
venture, Morgan Stanley Hua Xin, said that Zhejiang Southeast
Electric Power Co is planning to convert its B
shares trading in Shanghai into A shares.
A shares are only open to mainland investors and on a highly
restricted basis to qualified foreign institutions such as banks
or funds, which must apply for investment quotas.
The foreign-currency denominated B-share market was
originally created specifically to allow foreign investors to
buy shares in Chinese companies, but it lost relevance and
popularity after regulators began letting Chinese companies
access foreign capital directly by listing in Hong Kong and New
Trading in Zhejiang Southeast Electric's shares was
suspended on Nov. 21 pending an announcement, and rumours began
circulating in early January that the company, which recently
took down its ticker from the London Stock Exchange, was
planning a move from the tiny B-share market onto the main
A source from Zhejiang Southeast Electric Power declined to
confirm that it is planning to migrate its shares, but said he
expects the company will make an announcement before the
beginning of the Chinese Spring Festival, which begins on Feb.
If the plan is approved by the China Securities Regulatory
Commission (CSRC), it would require regulators to decide how to
handle the foreigners currently allowed to buy and sell the
company's B shares.
The main policy challenge lies in the fact that while the
foreign currency-denominated B-share market hosts many foreign
investors, foreign individuals are not legally permitted to
directly trade on China's yuan-denominated A share market.
Technically speaking, allowing foreign owners of B shares to
hold A shares constitutes an additional opening of China's
Regulatory approvals for companies moving off the board have
engendered a rally in the B-share market as speculators buy
shares in companies they think will be the next to migrate.
The B-share index has risen 30 percent since late
November after China International Marine Containers
(CIMC)) and property developer China Vanke
both announced plans to migrate to Hong Kong.
However, most B-share companies are not qualified to move to
Hong Kong, leaving them a choice between migration to domestic
boards or retaining a ticker on the B-share board and risk
delisting if regulators decide to close it down for good.