Beijing tempts mainland firms to list at home rather than Hong Kong

A COMPANY CALLED Datong Coal Industry was listed in Shanghai yesterday, the first initial public offering on the mainland A-share markets since new share sales were halted more than a year ago. The stock ended 63 per cent higher than its offering price.

Should Hong Kong people care? Absolutely, for Datong Coal once planned its market debut on the Hong Kong stock exchange.

And this isn't the only case where companies have abandoned plans to sell shares here in favour of mainland exchanges. According to bankers, Shanghai International Port Group, China's largest port operator; Pacific Insurance, the country's third-largest life insurer; and Industrial Bank all have made similar decisions.

They didn't make this decision in a vacuum. The China Securities Regulatory Commission has been offering quality companies incentives to list on the A-share market. 'They promise you a ticket on the express train if you chose A shares instead of H shares,' said a mainland banker. That's no small inducement, since the queue to sell shares in China is measured in years, not months.

The promises are not empty words. It took less than five months from application to sale for Datong. Pacific Insurance and Industrial Bank are talking about offerings this year. And Shanghai International Port, which ordinarily would not even qualify for listing under mainland law won an exemption and listed by way of an asset injection into its listed subsidiary.

'Companies are lobbied to switch the minute they apply for an H-share listing,' said a European investment banker. Indeed the pressure to sell shares on the mainland is so intense that only firms with good political connections can readily resist it.