More supply of A-shares coming to market

The South China Morning Post reports that the Shanghai Stock Exchange is set to accept a slew of A-share offerings on an accelerated schedule from large mainland Chinese enterprises currently listed only on the Hong Kong Stock Exchange. Companies said to be possibly listing A-shares in the next six months include China Mobile Communications (Hong Kong: 0941.HK, New York: CHL) and China National Overseas Oil Corp. (Hong Kong: 0883.HK, New York: CEO). These listings would be following in the footsteps of the recent A-share offering for PetroChina, which turned PetroChina into the largest market capitalization company in the world. The laws of supply and demand usually dictate that more supply=lower prices. If the law holds, the overall A-share market may be in for a cooling off period although the new listings themselves are likely to be well received as PetroChina's A-share almost tripling in share price on its first trading day shows. With local Chinese looking to continue getting high returns to offset higher inflation, the impact of more supply on the overall A-share market is a tough call, especially since the companies to be listed are of relatively higher quality. The Red Cat Journal awaits this battle of supply and demand with bated breath.

Over the long-term, more breadth in the Shanghai stock market is a positive for that market's development. However, it may mean a tougher competitor to Hong Kong's stock market down the line.