BEIJING HAS CLEARED the way for foreign-funded companies to sell shares on domestic stock markets, but aspiring listing candidates should not get too excited yet; analysts said guidelines issued this month were vague and it may be months - if not years - before the first listing arrives.
'The truth is nobody knows the exact timing,' said Fred Hu Zuliu, head of Greater China economic research at Goldman Sachs. 'My guess is that this is likely to happen on a six to 12-month horizon.'
Analysts said the absence of clear guidelines reflected official agonising over conflicting interests and points to technical and legal hurdles that were certain to frustrate even the most determined candidates.
Allowing foreign firms to sell shares to mainlanders is a bold step that promises advantages and risks to the securities markets. Mainland stocks trade at frothy valuations despite the acknowledged poor quality of many of the companies listed, reflecting the lack of investment alternatives available to Chinese investors. False accounting and market manipulation are rife.
The entry of foreign-funded stocks would offer more choice for investors and could also help raise the overall standard of the securities markets by importing best-practice standards of disclosure and transparency.
A mainland listing should be attractive for foreign companies wanting to expand in China. High valuations would give them the chance to tap capital cheaply, while the high profile of a public listing would offer the chance to develop their brand images in China.
But the process must be handled with care: investors may shun lumbering state-owned enterprises once they can invest in world-class multinationals. That could disrupt domestic industry and upset vested political interests.
