China's new stock accounts advance on rally, yuan

New brokerage accounts for dollar-denominated B shares jumped 68 percent to 1,366 in the week ended Nov. 13 from the previous week, according to clearing house data. That's the most in three months. Accounts for yuan-denominated A shares rose to 304,698 from 299,891.

The Shanghai B-Share Index jumped 14 percent last week, the biggest gain in a year, as the State Administration of Foreign Exchange said it will allow more institutions to offer currency exchange services. The shares also rose as overseas investors bet the government will resume the yuan's appreciation, boosting the value of companies' earnings when converted into dollars.

“The rally has been drawing new investors into the market,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million. A rising yuan and improving economy would help push stocks higher, he said.

B shares, which can only be bought and sold by domestic individuals and overseas investors, are traded in U.S. dollars in Shanghai and Hong Kong dollars in Shenzhen. A higher yuan may increase the value of the stocks' assets because they are denominated in the Chinese currency. A shares are mostly restricted to local investors.

'Easy Way'

“Buying into B shares is an easy way for overseas investors, most of whom are barred from buying into the yuan- share market, to get access to yuan assets amid the expectation about yuan appreciation,” said Zhang Kun, a strategist at Guotai Junan Securities Co. in Shanghai.

Twelve-month non-deliverable forwards for the yuan strengthened 5.6 percent this year to 6.6235 per dollar. The contracts show traders are betting on a 3.1 percent advance in yuan in a year from its spot rate of 6.8265.

The Shanghai B-Share index gained 1.6 percent to 261.19 today, its highest close since May 2008.

For both A and B shares, investors opened 306,064 stock accounts last week, the most since the five days ending Sept. 25 and rising for a fifth week.

The Shanghai Composite Index has rallied 19 percent this quarter, the second-best performer among 89 global benchmark indexes tracked by Bloomberg, as the nation's economy strengthened and the government said it will continue a “moderately loose” monetary policy. The gauge, which tracks A and B shares on the city's exchange, added 0.6 percent to 3,303.23 today.

Still, investors have yet to flock to the market in the numbers seen in July, when 700,617 accounts were opened in a single week. New accounts dropped as the Shanghai Composite plunged 22 percent in August amid concern the government would remove stimulus measures. The gauge remains 4.9 percent short of this year's peak on Aug. 4.

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