B-share (mainland China) Market Overview and Guide

In mainland China, B-shares are a type of share that can be traded on the Shanghai and Shenzhen stock exchanges.

B-shares are denominated in US dollars and are available to foreign investors.

The Shanghai Stock Exchange and the Shenzhen Stock Exchange are the two main exchanges where B-shares are traded.

B-shares were first introduced in 1992 to attract foreign investment to China.

The majority of B-share companies are state-owned enterprises, with some being listed on both the A-share and B-share markets.

Foreign investors can buy and sell B-shares through a broker or online trading platform.

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Shares are denominated in renminbi, the national currency of China, but can be settled in U.S. dollars on the Shanghai Stock Exchange and Hong Kong dollars on the Shenzhen Stock Exchange.

To invest in shares, you'll need to have a foreign currency account, which is a requirement for individuals in China who want to invest in B-shares.

These shares are traded on two Chinese stock exchanges: the Shanghai Stock Exchange and the Shenzhen Stock Exchange in mainland China.

Investors from around the world can also buy into B-shares, making them a relatively accessible investment option.

China shares, specifically B-shares, allow foreign investors to participate in the country's equity markets. They trade on two of China's leading stock markets, the Shanghai Stock Exchange and the Shenzhen Stock Exchange.

The face value of B-shares is in the renminbi, but transactions are settled in foreign currencies, such as U.S. dollars in Shanghai and Hong Kong dollars in Shenzhen.

As of Jan. 25, 2024, 44 companies trade B-shares on the Shanghai Stock Exchange, representing various sectors like retail, electronics, and real estate.

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China H-shares are the shares of over 300 mainland Chinese companies that are available for foreigners to trade on the Hong Kong Stock Exchange.

These shares offer a unique opportunity for foreign investors to gain exposure to the Chinese market, which is otherwise restricted to domestic investors.

The Hong Kong Stock Exchange is a major hub for trading China H-shares, providing a platform for investors to buy and sell these shares with ease.

China H-shares are available to trade alongside other Hong Kong-listed shares, offering a diverse range of investment options for foreign investors.

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China's stock market history is a fascinating story, and a crucial part of understanding China shares. B shares were initially limited to foreign investment.

On 19 February 2001, a significant event took place that marked the integration of Chinese stock markets. The China Securities Regulatory Commission began permitting the exchange of B shares via the secondary market to domestic citizens.

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The China Stock Market is a complex and rapidly evolving entity. The Shanghai Stock Exchange and the Shenzhen Stock Exchange are the two main bourses in China.

In 1992, the Shanghai Stock Exchange was established. The Shenzhen Stock Exchange was founded in 1991.

B-shares are listed on these two exchanges. The Shanghai Stock Exchange has a market capitalization of over 70 trillion yuan.

The Shenzhen Stock Exchange has a market capitalization of over 30 trillion yuan.

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Trading in the B-share market of mainland China is a unique experience, with its own set of rules and regulations. The trading sessions in Hong Kong are divided into morning and afternoon sessions, with the morning session running from 9:30 to 11:30 and the afternoon session from 13:00 to 14:57.

The currency used for trading in the B-share market is USD, but the settlement currency is HKD or USD, depending on the specific market. For example, in the Shanghai-B Share market, the settlement currency is HKD and USD, while in the Shenzhen-B Share market, it's only HKD.

Here's a breakdown of the trading sessions and currencies for both markets:

Orders for the next trading day can be accepted as early as 18:00, after the previous market close.

Trading Information is a crucial aspect of trading, and understanding the specifics can make a big difference.

In Hong Kong, trading sessions are held from Monday to Friday, with morning and afternoon sessions. The morning session typically runs from 9:30 to 11:30, and the afternoon session starts at 13:00 and ends at 14:57.

Pre-close auction sessions are also available, but only for limited services. These sessions are crucial for traders who want to adjust their positions before the market closes.

The settlement currency and duration for trades in Hong Kong are typically HKD, USD, or a combination of both, with a settlement duration of T + 3. This means that trades are settled three business days after the transaction date.

Traders need to be aware of the earliest time they can accept orders for the next trading day, which is usually at 18:00 after the previous market close. This is a critical deadline for traders who want to get a head start on the next trading day.

China has two stock exchanges, the Shenzhen stock exchange and the Shanghai Stock Exchange, each with its own coding rule.

The Shenzhen stock exchange coding rule is straightforward, with China A Shares starting with 0XXXXX and China B Shares starting with 2XXXXX.

The Shanghai Stock Exchange coding rule is similar, with China A Shares starting with 6XXXXXX and China B Shares starting with 9XXXXXX.

If you're trading on the Shenzhen B share, you'll need to add .SZ after the code, while for Shanghai B share, you'll add .SS.

Some shares may have a [PT] or [ST] prefix, indicating they're high-risk shares.

Here's a breakdown of the coding rules:

The [PT] prefix indicates a particular transfer, which facilitates the transfer of suspended listed shares, while the [ST] prefix shows special treatment for listed companies with certain performance issues.

The trading unit is a crucial aspect of stock trading. In the case of buying Shenzhen B share, the trading unit is 100 shares per lot.

For buying Shanghai B share, the trading unit is also 100 shares per lot. Selling, on the other hand, requires a trading unit of just 1 share per lot.

Odd lots, which are less than 1 lot, are also a consideration. This is a key fact to keep in mind when trading.

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Before you start trading, it's essential to know the rules of the game. Margin financing on trading China B shares is not accepted, so you'll need to have enough cash on hand to cover your trades.

The rotation trading system in Shenzhen and Shanghai Stock Exchanges is T+1, which means you can't buy and sell a China B stock on the same day. This is to prevent market volatility and ensure smooth trading.

Short selling is not permitted in the China B Market, so you'll need to think carefully about your investment strategies. This is likely due to the unique market dynamics and regulations in place.

If you're interested in trading China A-Shares, unfortunately, our company doesn't provide this service. You'll need to look elsewhere for this type of trading.

Here are some key items to keep in mind before trading:

Trading in B-shares in mainland China is subject to some unique rules and fees. Payment transactions with domestic counterparties in Shanghai can only be executed and settled in USD, while those in Shenzhen can only be settled in HKD.

The contract stamp duty payable is 0.1% of the underlying value of a B-share transaction, paid by the seller and included in the net settlement amount.

You'll also need to factor in dealing charges, which include brokerage commission, stock exchange levy, clearing fee, and administrative charges. These charges are payable twice, by both the buyer and seller.

Here's a breakdown of the dealing charges:

In Shanghai, B shares are traded in US dollars, whereas in Shenzhen they are traded in Hong Kong dollars.

The face values of B shares are set in Renminbi, which is the official currency of China.

If you're planning to trade B shares in Shanghai, keep in mind that you'll be dealing with US dollars, whereas in Shenzhen, Hong Kong dollars will be the norm.

This difference in currency can affect the way you calculate fees and exchange rates, so it's essential to be aware of these variations.

Here's a quick rundown of the currencies involved in B share trading:

Opening individual investor accounts by CBL is not permitted. This restriction applies to all investors looking to open accounts with CBL.

Payment transactions with domestic counterparties in Shanghai can only be executed and settled in USD. This applies to B shares listed on the Shanghai Stock Exchange and deposited at CSDCC's Shanghai branch.

Payment transactions with domestic counterparties in Shenzhen can only be executed and settled in HKD. This applies to B shares listed on the Shenzhen Stock Exchange and deposited at CSDCC's Shenzhen branch.

Trading outside the Shanghai and Shenzhen Stock Exchanges is prohibited. As a result, internal transfers of Chinese B shares between CBL accounts are not possible.

CSDCC does not provide a true delivery versus payment service. This means that transactions between buying and selling brokers are settled against payment only.

For delivering shares free of payment from/to another CSDCC account, the delivering CSDCC participant must provide "convincing proof" that the owner has not changed. This applies to both Shanghai and Shenzhen exchanges.

NCBO transfers in the Shenzhen market must meet certain criteria and are subject to approval by CSDC Shenzhen on a case-by-case basis.

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Contract stamp duty and other charges are a crucial aspect of trading on the Shanghai and Shenzhen Stock Exchanges. The contract stamp duty payable is 0.1% of the underlying value of a B share transaction, and it's payable by the seller.

This charge should normally be included in the net settlement amount that the broker confirms to the investor. The broker also includes other dealing charges in the net settlement amount, which are payable twice by both the buyer and the seller.

The brokerage commission, for example, currently does not exceed 0.3% of the gross settlement amount. It's worth noting that this commission has a minimum fee of USD 1 for Shanghai and HKD 5 for Shenzhen.

The stock exchange levy is another charge that's included in the net settlement amount. Currently, it's 0.0487% of the gross settlement amount for trades executed. However, for block trades on the Shanghai Stock Exchange, 70% of the standard fee is applied, while for block trades on the Shenzhen Stock Exchange, 50% is applied.

A clearing fee of 0.002% of the gross settlement amount is also payable, with a maximum of USD 50 for trades executed on the Shanghai Stock Exchange. On the Shenzhen Stock Exchange, the clearing fee is 0.05% of the gross settlement amount, with a maximum of HKD 500.

An administrative charge, levied by the China Securities Regulatory Commission, is 0.002% of the gross settlement amount for trades executed at the Shenzhen Stock Exchange.

Here's a summary of the charges you can expect to pay when trading on the Shanghai and Shenzhen Stock Exchanges:

To invest in Shanghai or Shenzhen B shares, foreign investors don't need approval from Chinese authorities, but they must apply for an investor code at CSDCC Shanghai and/or Shenzhen.

The investor code is a crucial piece of information that needs to be shared with the broker before buying or selling shares. The code is used for trading purposes and share registration at CSDCC.

Customers must request separate investor codes for each market if they want to invest in both Shanghai and Shenzhen.

To fulfill the investor requirements, you need to understand the domestic counterparty procedure. Customers must request their brokers to deliver or receive shares to or from HSBC's clearing participant code.

If you're a domestic investor, you'll need to provide your brokers with your investor code and HSBC's clearing participant code, which is either 001 (Shanghai) or 890200 (Shenzhen).

To ensure timely processing, customers must provide their brokers with this information well before the market deadline.

Here's a quick reference table to help you keep track of the necessary information:

Customers must request their brokers to deliver or receive shares to or from HSBC's clearing participant code by the market deadline.

To invest in Shanghai or Shenzhen B shares, foreign investors don't need approval from Chinese authorities, but they must apply for an investor code at CSDCC Shanghai and/or Shenzhen.

Foreign investors are not required to obtain approval from any Chinese authorities before investing in Shanghai or Shenzhen B shares.

However, investments are subject to the investor's application for an investor code at CSDCC Shanghai and/or Shenzhen. Investor codes and the relating CSDCC accounts allocated through CBL and HSBC will be opened in the format "Clearstream / the underlying customer's name".

The opening of individual investor accounts by CBL is not permitted. Customers who want to invest in both the Shanghai and Shenzhen markets must request separate investor codes for each market.

Investor codes and the name associated with each investor code are used both for trading purposes and for share registration at CSDCC. Customers must communicate their investor code to their broker before buying or selling shares on the Shanghai or Shenzhen Stock Exchanges.

Customers must similarly specify their safekeeping account in each receipt or delivery instruction sent to CBL as described in the respective instruction specifications. Note that to avoid possible settlement delays and penalties, the name chosen for the investor code must be used for all trade orders and settlement instructions pertaining to the respective investor.

Registration in a nominee name is also possible, but customers requesting registration in the nominee name must disclose, as per local regulation, the final beneficial owners to CSDCC on a quarterly basis for Shenzhen B shares.

To invest in B shares, you'll need to obtain an investor code, which is required for trading and share registration at the China Securities Depository and Clearing Corporation (CSDCC). This code is obtained through CSDCC Shanghai and/or Shenzhen, and must be used for all trade orders and settlement instructions.

You can open an investor code in either the beneficial owner's name (institutional account) or a nominee name. However, for Shenzhen B shares, customers requesting registration in the nominee name must disclose the final beneficial owners to CSDCC on a quarterly basis.

To start trading, you'll also need to request that Clearstream opens a sub-account for each investor code with HSBC.

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So, you're considering investing in B-shares, but you're not sure how they compare to H-shares. B-shares trade on the Shanghai Stock Exchange and the Shenzhen Stock Exchange, and are domestically listed.

H-shares, on the other hand, trade on the Hong Kong Stock Exchange. This is a key difference between the two.

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One of the benefits of H-shares is that they are available to local and foreign investors. You can trade them on the Hong Kong Stock Exchange, which is a major global financial hub.

Here's a quick summary of the main differences between B-shares and H-shares:

As you can see, the main difference between B-shares and H-shares is the exchange on which they trade. But both types of shares are available to local and foreign investors.

Allow mainland buyers to invest in B shares. This will help increase volumes and re-attract foreign interest, which is currently lacking in the B share markets.

As of Jan. 25, 2024, 44 companies trade B-shares on the Shanghai Stock Exchange, while 41 shares trade on the Shenzhen Stock Exchange. These companies represent a variety of sectors, including retail, electronics, machinery, real estate, tourism, and food and beverage.

The China Securities Regulatory Commission opened up investment in B-shares from local Chinese investors in Feb. 2001. This move allowed mainland residents to trade these shares on the secondary market.

The discounts of B shares to A shares range from 65 per cent to 83 per cent in Shanghai, and from 36 per cent to 72 per cent in Shenzhen. This significant discount suggests that B shares are undervalued compared to A shares.

Only in Shenzhen, one or two of the 13 listed B share companies are showing a loss on the original subscription price, but these are the most recent listings.

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