AU EDITORIAL: Would You Like an A, B, H or an S?
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June 8, 2007
Well, what is he on about now? That very, very hot China market! There are few markets that are watched so intently as Shanghai’s index. If you are a local you can own ''A'' shares, but I know of Chinese residents in Australia who trade ''A'' shares online from the comfort of Australian shores. ''A'' shares have been tough to get a hold of, which caused the frenzy that resulted in the Shanghai index doubling last year and rising 40% so far this year. In some months over 1,000,000 new accounts have been opened.
As a foreigner you can own ''B'' shares, but they are even tougher to get your hands on. The ''B'' market is a small fraction of the ''A'' market, plus there are many hurdles.
Your next alternative is to partake in ‘C’ shares – almost any stock with a ‘China’ in it. There are a couple of hundred of these listed in Singapore as ‘S’ shares and even more in Hong Kong as ‘H’ shares. But the B, H and S trade at steep and varying discounts to the ‘A’ shares, since many ''A'' shares trade at over 50 times earnings! This, not surprisingly, has tantalised the arbitragers, but here you really have to be in ‘the know’.
Today’s Shanghai market has the hallmarks of the Taiwan market between 1987 and 1990, when it climbed tenfold in three years. Mind you it is currently around 8500 and still clawing back after its own crash.
Makes you wonder how crazy the China market has to get before the inevitable happens. But like Taiwan there have been many experts calling ‘exit’ from the sidelines well before the top.
If you want to enjoy the booty from the China boom maybe you just buy good ol’ Aussie stocks that have exposure to China - like our miners. And I am sure many of you have been doing just that.
Enjoy the ride!
Tom Scollon
Chief Analyst
Trading Tutors
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