Shanghai free-trade zone

Push for Shanghai international board grows

HK chief of mainland's sovereign wealth fund urges launch to fast-track city's global goals

PUBLISHED : Monday, 14 October, 2013, 12:00am
UPDATED : Monday, 14 October, 2013, 4:31am

The creation of an international stock exchange in Shanghai's free-trade zone would put the city on the fast track to becoming a global financial centre, the head of the Hong Kong unit of the mainland's sovereign wealth fund told the South China Morning Post.

Lawrence Lau Juen-yee, the chairman of CIC International (Hong Kong), urged the securities regulator to launch the long-awaited board soon as a way to grant mainland capital direct access to shares of American corporate giants such as Microsoft and Boeing, describing it as an ideal method to utilise the country's huge pool of funds.

"Holding shares of top American companies such as Microsoft and Boeing is by all means better than buying United States treasury bonds," Lau said. "An international board could be a big help to Shanghai if the world's best companies are tradable in the city."

The Shanghai Stock Exchange has been striving to establish an international board since 2009, a platform for foreign firms to raise yuan capital and list their shares.

But it has never happened as the China Securities Regulatory Commission has been wary of triggering a slide in the domestic market if investors switched from local to foreign shares.

Market talk now is that the regulator has put the international board back on its agenda, after it allowed the Shanghai exchange to set up a branch in the free-trade zone, a testing ground for the mainland's next stage of financial liberalisation.

Analysts said it would still be some time before Beijing made a final decision to launch the board since market sentiment remained weak.

Lau said the hesitation in launching an international board and the suspension of initial public offerings on the mainland were hurting the nation's capital markets development.

The CSRC has halted initial share sales since October last year to stem equity supply while bolstering existing stock listings.

"Companies are looking for capital and it makes no sense to bar them from equity financing," Lau said. "The suspension of IPOs is sort of forcing them to borrow money from loan sharks."

Lau declined to comment on topics related to China Investment Corp, the nation's US$500 billion sovereign fund, of which CIC International is a unit.

China set up the sovereign wealth fund in a move to diversify its massive foreign reserves, looking to increase its investments in overseas equities and resources.

In late 2010, CIC established its Hong Kong subsidiary and hired Lau, a former vice-chancellor of Chinese University, as the chairman.

Lau has been low-key after taking the position, rarely taking media interviews.

He was in Shanghai at the weekend participating in an event hosted by Fudan University's School of Management, where he is an adviser.