Foreign listings in Shanghai still a long way off

PUBLISHED : Friday, 16 September, 2011, 12:00am
UPDATED : Friday, 16 September, 2011, 12:00am


A senior Shanghai official yesterday underscored the difficulties of launching the international board on the local stock exchange, dashing hopes of any imminent A-share initial public offering by a foreign firm.

Fang Xinghai, the director general of Shanghai's financial services office, told a press conference that the regulators had to take into account A-share market sentiment, liquidity and trading rules before making a decision on the debut of the long-heralded board where foreign companies would be traded.

'If you ask me why it's so difficult [to launch the board], all I can say is that it's always been difficult to implement any liberalisation in the finance sector,' he said.

'But I still believe we will eventually overcome the difficulties.'

Fang's remarks represented an about-face after earlier stating that the city government hoped to launch the international board this year.

Beijing announced it was creating the board for top foreign companies to raise yuan funds on the Shanghai bourse in 2009 but didn't give a clear timetable. It was expected that the first foreign firm would float A shares in the second half of last year as the mainland liberalised the capital market, part of efforts to build Shanghai into a global financial centre.

The benchmark Shanghai Composite Index dropped 14.3 per cent last year and regulators were spooked by concerns of a liquidity drain amid large-size initial public offerings by international corporate giants such as HSBC Holdings.

Shang Fulin, chairman of the China Securities Regulatory Commission, said in May that the international board was in the pipeline, heightening expectations of an IPO by a foreign company soon.

At least two government officials familiar with the CSRC told the South China Morning Post at that time that the board was counting down to a debut. But the weak market prompted regulators to put the plan on hold, causing further gloom. The market has already lost 12 per cent this year.

The on-again, off-again plans to establish the international board are a vivid example of opaque policymaking on the mainland, particularly when it comes to the stock market.

Fang likened the international board's launch to the share structure reform that confused investors for six years between 1999 and 2005.

Beijing first proposed all shares be made free-floating in 1999. About two-thirds of the formerly non-tradable stakes held by the state-owned parents of the listed firms would be unlocked.

But it took until 2005 for regulators to order the state-owned parents to negotiate with minor shareholders - to offer them compensation in exchange for the right to unlock the non-tradable shares.

The mainland will target only the world's top companies when it launches the international board, according to investment bankers.

The decision to allow foreign firms to list on the domestic exchange is aimed at honing Shanghai's image as a global financial hub.