China's Shanghai B-Share Index Gains Most November on Merger Speculation

China’s B shares surged on speculation the foreign-currency denominated shares will be merged with local-currency counterparts ahead of the likely introduction of an international currency board.

The Shanghai SE B Share Index, tracking B shares which are traded in U.S. dollars and restricted to overseas investors, gained 5.1 percent to 254.86 as of 2:54 p.m. local time, the most since Nov. 13, 2009.

The gauge has climbed 27 percent in the past 12 months, compared with a 12 percent loss for the Shanghai SE A Share Index. China may allow foreign companies to sell stock in Shanghai next year, Fang Xinghai, director general of Shanghai’s financial services office, said July 8.

“The market is expecting that B shares will have to be worth more if the government merges them with the A-class shares,” said Xu Guangfu, a Shanghai-based analyst at Xiangcai Securities Co. by phone. “The anticipation is that the authorities will have to deal with the issue of B shares before they introduce the international board.”

Some B-share companies are trading at a discount of as much as 50 percent to A shares, Xu said.

Kama Co., a Shanghai-based manufacturer of diesel engines, climbed 10 percent to 64.7 cents. Huangshi Dongbei Electrical Appliance Co., a refrigerator-based maker, surged 10 percent to 78 cents.

To contact the Bloomberg News staff for this story: Chua Kong Ho at Kchua6@bloomberg.net

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