Beijing is being urged to allow SAR-listed companies to issue shares denominated in yuan, according to Hong Kong Exchanges and Clearing (HKEC) chairman Charles Lee Yeh-kwong. The move, which would allow Hong Kong companies to raise yuan in the SAR, was being studied by the authorities, Mr Lee said. Many Hong Kong-listed companies had a huge demand for yuan to cover the needs of their mainland business operations, he said. Local companies are allowed to raise funds through the securities market only in Hong Kong dollars which they must then exchange for mainland currency. Mr Lee admitted that such a plan would not be easy to implement as the yuan was not freely convertible. Moreover, brokers said investors might have concerns about yuan-denominated shares because of fears about a devaluation. Also, if locally listed companies issued huge volumes of shares denominated in yuan, it might add to pressure on the yuan, Mr Lee said. He has proposed to mainland officials that they might set a cap on the amount of shares denominated in yuan to be issued by the companies. 'This will cap the number of shares denominated in yuan to be circulated in Hong Kong,' he said. 'This will limit the impact on the exchange rate of yuan.' Apart from the proposal to allow companies to issue yuan-denominated shares, the HKEC is also working with the Hong Kong Monetary Authority (HKMA), on moves to allow SAR-listed companies to issue shares in US dollars, expected to be introduced in the second half of next year, he said. US dollar-share offering could be introduced after the HKMA's launching of US dollar clearing in the local banking sectors in Hong Kong. The local securities clearing house, Hongkong Clearing, also planned to launch a multi-currency clearing system next year to facilitate the issue of shares in US dollars and other currencies, he said. STOCK EXCHANGE
