Chinese B Shares in Shanghai Stock Exchange

(Abridged from China Investment Report on Aug. 18, 2004)

Investing in Chinese B Shares Listed in Shenzhen Stock Exchange
Be Prepared, as They are at Multi-Year Lows

INTRODUCTION

Last month’s issue of our China Investment Report detailed how we selected quality B-Share companies currently listed in the Shanghai Stock Exchange. Using our selection process, out of a total of 55 companies, we listed 9 companies that we consider quality companies in Shanghai Stock Exchange’s B-share market. In this issue, we shall use the same selection criteria, and look at B-Share companies listed in Shenzhen Stock Exchange.

B SHARE COMPANIES IN SHENZHEN

Chinese B shares in Shenzhen are traded in Hong Kong dollars. They are one of the most important investment vehicles for Hong Kong investors to trade Chinese shares. Compared with stocks listed in Shenzhen and those listed in Shanghai, we found that although companies listed in Shenzhen tend to be of high qualities than their counterparts in Shanghai, they are traded more expensively. Below, you will find a chart that pictures ShenZhen B-Share Index movement from 2002 to present.

Currently, there are 59 listed companies in Shenzhen B Share market. Again, as we explained in the last issue of our newsletter, most of the companies listed there, according to Jim Rogers, co-founder of the Quantum Fund, are “the inefficient holdovers from communist days, those giant labor-intensive companies that will never show a profit and whose going public was only a way of getting them off the government’s hands.” Today, using similar strategies, we will provide you with a list of quality B Share companies listed in Shenzhen. In the next issue, we shall examine potential growth companies listed in Hong Kong Growth Enterprise Market.

SELECTING PROCESS (Abridged)

B Shares Listed in Shanghai Stock Exchange

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