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BIZCHINA> Top Biz News
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Shanghai float unlikely for foreign firms
By Zhou Yan (China Daily)
Updated: 2009-05-08 07:57
Foreign firms are unlikely to list on the Shanghai bourse this year, as the authorities are yet to work out the detailed risk control measures and entry criteria for listing, industry experts said. "China's recent steps, including the yuan-settlement trial runs with the neighboring countries and regions, have paved the way for foreign firms to list on the Shanghai bourse, but the board is yet to finalize the norms," said Lu Hongjun, director, Shanghai Institute of International Finance. Lu, an advisor to the local government to help Shanghai become an international financial center, elaborated that foreign companies are different from domestic peers in terms of business scale and operations. Regulators, thus, have to be cautious in controlling risks for the sake of the mainland's financial security, particularly during the financial crisis.
Sources from the Shanghai Stock Exchange (SSE) said the bourse is actively propelling the international board (to list foreign firms) now, which is among the most significant works for SSE this year, according to Securities Times reports. "Top regulators are working on the plan, but no timetable has been set yet. We expect it to start once initial public offerings (on the main board) resume," it said. Liu Jun, analyst, Changjiang Securities, said the international board is still at an initial phase, and cannot debut this year, as it will trigger the market to have drastic corrections on concerns of capital diversions from the main board. However, to open a door for foreign businesses to float in Shanghai remains the key determinant to fashion the city into a New York-style international financial center. According to figures compiled by law firm King & Wood, nearly 15 percent of the companies listed on the New York Stock Exchange (NYSE) by the end of 2008 are overseas ones. "Apart from the legal system environment and talent, it is important for Shanghai to go international by luring more public floats from foreign firms in the city," said Cao Huining, professor of finance at Cheung Kong Graduate School of Business. He added that due to the relatively high price-earnings ratio (P/E ratio) on the mainland, foreign firms have shown interest in trading for a long time. China's benchmark index traded at a P/E ratio of 21.12 in 2008, compared with Hong Kong Hang Seng Index's 9.52 at the same time. HSBC Holdings, the largest bank in Europe, said on Tuesday that it hoped to join the first batch of foreign companies to trade in Shanghai for more funding and brand awareness. Before that, foreign lenders like Bank of East Asia and the Development Bank of Singapore had expressed their willingness to list on the mainland initially. "Sizable international companies with solid stance and wide brand recognition in China, such as large banks, beverage makers, and hi-tech firms could be the preferred choices for the regulators," said Cao. Other factors, including a company's personnel structure, assets and liabilities, would also be considered, Lu said. "We probably will refer to the criteria set by foreign exchanges for Chinese companies' listing overseas," he said. "A balance between the standards set by NYSE with rigid rules and relatively loosened NASDAQ could be a choice," Cao suggested, adding that companies from Singapore and Japan, which are geographically and culturally close to China, are more likely to become the preferred candidates initially. (For more biz stories, please visit Industries)
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