Wait goes on for Shanghai's new board

PUBLISHED : Wednesday, 18 January, 2012, 12:00am
UPDATED : Wednesday, 18 January, 2012, 12:00am


Shanghai mayor Han Zheng yesterday denied the city's stock exchange was about to launch its long-heralded international board, underscoring the confusion among policymakers over the equity markets.

Han told a press conference that it was not the right time to officially establish the planned board, on which foreign companies would sell yuan-denominated shares.

This bewildered investors, who were told by a Shanghai Stock Exchange executive in November that the board was ready to start operating.

'The launch of the international board should be decided when the timing is correct,' Han said. 'But it not the best time to do so. Therefore, we have no timetable.'

He said both the city government and the mainland's securities regulator still had preparations to complete, contradicting Shanghai exchange vice-president Xu Ming's statement two months ago.

The central government announced in 2009 that it would let the Shanghai exchange create the international board to help establish the city as an international financial centre. The local government had lobbied for an early launch of the board to accommodate global big names, including HSBC, that are preparing fund-raisings on the A-share market.

It was expected that the first foreign company would receive the nod to float an initial public offering in the second half of 2010 even though the regulator didn't unveil a clear-cut time frame then.

Concern about a market downturn amid an influx of new equity by large foreign companies made the regulator hesitant about the liberalisation. It was not until May last year that the then China Securities Regulatory Commission (CSRC) chairman Shang Fulin told a forum in Shanghai that the international board was in the pipeline. The regulator asked major state-owned news organisations not to report negatively on the board in order to create a an environment conducive to announcing its launch.

Xu became the first securities official to publicly announce preparatory work was complete, only to find his words caused a sharp fall in the already weakened market. The benchmark Shanghai Composite Index has fallen 8 per cent since Xu announced the board was ready.

It is widely believed the mayor's words signal that the international board will be put on ice for at least six months.

'It's not just a matter of timing,' Essence Securities analyst Liu Jun said.

'It's about the regulators' mindset. But unfortunately, they keep changing their minds.'

It is not uncommon on the mainland for financial regulators to perform U-turns on market liberalisation.

The CSRC planned to launch stock index futures in 2007, but it was not until April 2010 that Shanghai-based China Financial Futures Exchange started trading of the mainland's first equity-based derivative.


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