Plan may allow foreign stock sales on mainland ( 2007-04-27 )

Plan may allow foreign stock sales on mainland


The Shanghai Stock Exchange Thursday advised Chinese financial authorities to set up special boards that allow overseas firms to list shares on mainland markets.

"China should steadily beef up the internationalization of its stock markets and step up efforts to lure foreign investors," the local bourse said in its yearly market-quality report.

Authorities should "permit overseas companies to go public domestically when the time is ripe and establish international boards (for these firms) in domestic stock exchanges," the report said.

Chinese mainland equities have more than tripled in value since the start of 2006 as a result of sustained capital inflow - much of it from individual investors who poured their bank savings into securities to capitalize on the stock market boom after years of poor performance.

Financial authorities have also been striving to encourage high-quality domestic enterprises to list shares to absorb mounting liquidity. The stock regulator is scheduled to let overseas-incorporated Chinese firms go public on the mainland markets this year.

Although the report by the local exchange doesn't automatically prompt regulatory rule changes, it may indicate where the bourse and regulators are heading.

Officials at the Shanghai exchange and the China Securities Regulatory Commission declined to comment further on the issue yesterday.

China's two stock exchanges, in Shanghai and Shenzhen, now host only Chinese mainland-incorporated companies. The markets are open to select overseas institutions under the so-called Qualified Foreign Institutional Investor scheme.

Yesterday's report did not specify how the stock market might be opened further to foreigners.

Terminals abroad

But sources said earlier that, apart from enlarging the investment quotas of overseas institutions, regulators may allow the installation of trading terminals abroad to facilitate foreign trade in yuan shares.

"It might take years to see an international board appear, due to difficulties in engaging foreign firms in the domestic market," said Wu Zhiguo, a Guohai Securities Co analyst.

"Even so, the report indicates a trend toward improving market quality and deregulating the industry further to foreign participation."

A growing number of multinational companies such as HSBC Holdings Plc, Europe's biggest lender, and Bank of East Asia have said that they would consider Chinese mainland listings if regulators permit, according to earlier media reports.

Investment banking sources said yesterday that they were consulted on the proposal by the local exchange several times since last year, but no official preparatory work has started.

Regulators apparently want to gain experience by first listing "red chips" to test the market response, the sources said.

China's stock market watchdog is on track to welcome red chips, or overseas-incorporated mainland companies that trade in Hong Kong, to sell shares at home this year.( Daily)