Investment bank Morgan Stanley has been asked by China's Ministry of Finance to suggest the best way it can ensure the Hong Kong stock market performs smoothly during and after the handover, the bank's Asia chairman, John Wadsworth, says. Mr Wadsworth told an American Chamber of Commerce conference yesterday the bank was 'in the process of working on a paper' which would be definitive in the views it passed on to the ministry. 'The Hong Kong market works very well, therefore leave it alone,' he said. It is understood the move is possibly the first time the ministry has turned to high-profile private sector financiers for advice on its policy towards the Hong Kong market. After the handover, the market will continue to be overseen and regulated by the Stock Exchange of Hong Kong and the Securities and Futures Commission (SFC) under the one country, two systems rule. It is widely accepted China's influence on market policy will increase significantly after the handover and mainland authorities have developed contacts with the exchange and the SFC in anticipation of the change of sovereignty. Mr Wadsworth said the integrity of Hong Kong's existing regulatory framework and its status as a primary listing venue for Chinese enterprises would encourage stability. 'As the market expands through the listing of Chinese companies, that will be a positive boost . . . as all activity surrounding red chips and H shares will bring growth to Hong Kong,' he said. China Securities Regulatory Commission chairman Zhou Daojiong has pledged Hong Kong will remain the major listing venue for mainland firms, after experiments with flotations in New York. Morgan Stanley has developed strong relations in China, having pioneered its investment banking sector, setting up its 35 per cent-owned China International Capital Corp (CICC), the mainland's first joint-venture investment bank. CICC opened in August last year and is 42.5 per cent held by China Construction Bank. The remaining 22.5 per cent is held by three other partners. CICC has a staff of 40 in Beijing, compared with Morgan Stanley's more than 10,000 worldwide and 500-plus in Hong Kong. Mr Wadsworth said CICC would generate revenue from interest on money market instruments and corporate financing deals. He expected it to turn profitable next year when it started foreign exchange trading. He said CICC was engaged in direct investment but added it would be several years before returns were seen. He confirmed CICC wanted to participate in A-share underwriting, but it had yet to secure a licence. Mr Wadsworth declined to confirm if China Eastern Airlines, sponsored by Morgan Stanley, had scrapped a direct listing solely in New York by choosing a dual listing in Hong Kong and New York modelled on Shanghai Petrochemical Co's flotation. 'Hong Kong remains the market for Asian entities, especially for Chinese companies,' he said. Eastern Airlines, among the second batch of overseas listing candidates, is said to be intending to raise about US$400 million.