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Clampdown on foreign listing plans

ALL plans for direct overseas listings by mainland companies now need prior approval of China's Securities Committee which wants to control an impending surge of capital-raising abroad.

Sources said the newly formed securities watchdog under the State Council has issued a document to mainland firms, saying it would be the sole arbiter in approving or rejecting listing plans.

The new measure highlighted Beijing's concern that uncontrolled direct overseas listings could undermine the fledgling domestic stock markets, the sources said.

It is also expected to put on hold some of the announced foreign listing plans of mainland companies.

''The Securities Committee is not very happy with the latest rush by mainland firms for a listing in Vancouver, New York and elsewhere,'' said a foreign broker with a working relationship with the Securities Committee.

''It wants to keep a close eye on the situation while re-affirming Hongkong listings as the first priority.'' Mainland issues in Hongkong had been designated by the central authorities as test cases for foreign listings, the broker said.

However, this view was not backed by the People's Bank of China, which had sole responsibility for regulating mainland stock markets before the establishment of the high-powered Securities Committee.

The central bank has given the go-ahead to Shenzhen-listed China Southern Glass, Gintian Industry and Shenzhen Vanke for Vancouver listings.

The latest development reflects uncertainty over whether greater regulation should be imposed on foreign listings.

It also signifies that the new watchdog is gradually assuming a larger role in regulating the market, particularly in some grey areas untouched by the central bank.

China Southern Glass deputy managing director Wang Chunsheng said the company was still keen to seek a listing overseas, but the listing venue might not be Vancouver.

Mr Wang appeared uncertain of specific details of the overseas listing plan.

Earlier he had said he expected China Southern Glass shares to be traded on the Vancouver exchange in the first quarter of the year.

Meanwhile, some of the foreign listing plans engineered by Brilliance Group, an offshoot of the central bank, are also understood to have been affected.

Arthur Andersen partner Meocre Li said he was aware that some companies and financial advisers working on such flotation plans were waiting for a clearer set of guidelines from the Securities Committee.

However, that did not necessarily mean their listing plans would have to be deferred, he said.

''It is good to see the development of a regulatory framework market practitioners can adhere to,'' he said.

While agreeing that the Chinese authorities had full jurisdiction to regulate mainland interests raising capital abroad, Mr Li expressed doubts that foreign joint ventures should be subject to such control.

The issue has raised debate in the broking community in China and overseas in recent weeks.

Credit Lyonnais Securities (Asia) managing director Gary Coull said encouraging mainland enterprises to list overseas might look good in the short term, but neither the companies nor China's capital markets would benefit in the longer run.

''Launched away from their home markets, today's hot issues may become tomorrow's lemons,'' he said.