China securities regulator encourages small firms to list in Shanghai
Securities regulator pushes offering applicants to give priority to Shanghai exchange over rival Shenzhen, bolstering city's financial ambitions
The mainland's securities regulator has tipped the balance in favour of the Shanghai Stock Exchange as the mainland's premier financial bourse, encouraging small firms to list shares on it in a move reinforcing the city's efforts to transform itself into a global financial centre.
China Securities Regulatory Commission officials are privately lobbying initial public offering applicants to give priority to the Shanghai exchange as a listing venue, according to investment bankers.
The regulator hopes to evenly distribute listing resources to the Shanghai and Shenzhen exchanges after the smaller Shenzhen bourse outshined its bigger rival in terms of flotation numbers and fundraising since 2011.
The Shanghai exchange lobbied the CSRC for four years for approval to list small firms, but it was not until late March that the regulator decided to grant the Shanghai bourse its wish.
The CSRC said the efforts were aimed at giving exchange prospects freedom in deciding their listing venues.
Two sources close to the CSRC said the regulator aimed to bring the number of listing applicants in Shanghai to 300. More than 30 firms have changed their listing venues recently.
Twenty-two firms, including Zhoushan Port, announced plans to list on the mainland yesterday, boosting the number of potential stock market debutants after a two-month lull in new listings. This increases the total number of companies that announced their IPO plans in the past six days to at least 87, a trend that may worry some investors who fear a flood of new listings could pressure mainland share prices by reducing funds for existing stocks.
"Shanghai, as a would-be international financial centre, will benefit from the policy direction," said Long Yong, the chief executive of Guosen Securities' private equity subsidiary. "It will inject new vigour into the Shanghai exchange."
The Shanghai exchange has dominated its rival in Shen- zhen since the regulator would normally arrange for large companies to raise funds in the mainland's commercial hub while letting small-capitalisation firms launch their listings in Shenzhen.
The Shenzhen exchange began to eclipse the Shanghai bourse in 2011 as its SME board and start-up board ChiNext market attracted a rising number of offerings.
At the start of this month, 168 companies were waiting to float new shares on the Shanghai exchange, compared with 507 applicants lining up to list in Shenzhen. The CSRC is now encouraging those planning to list in Shenzhen to change their listing venue.
Shanghai unveiled its ambition of becoming a global financial hub in 2009, with the investment community pinning hopes on the local exchange to drastically internationalise its businesses. Shanghai planned to establish an international board on which foreign corporate giants would float yuan-denominated shares. But the plan was never implemented.
The Shanghai exchange's underwhelming efforts in fundraising since 2011 became an embarrassment to city officials.
Premier Li Keqiang has supposedly expressed his confidence in Shanghai since he came to power last year. The State Council in late September designated Shanghai to develop the mainland's first free-trade zone as a test bed for further economic reforms nationwide. This month, the Shanghai and Hong Kong stock exchanges announced a "through train" scheme.
Additional reporting by Reuters