China proposes to internationalize her stock exchanges.
From the Bloomberg,
China is “basically ready” to allow foreign companies to sell equity in the world’s second- biggest stock market, according to the Shanghai Stock Exchange official in charge of the so-called international stocks board.
The exchange has finished working on listing and trading rules, while the technological, regulatory, and system requirements are “basically ready,” Xu Ming, executive vice president of the Shanghai Stock Exchange, said in a Nov. 11 interview at the bourse. While there is no timetable for introducing the board, it should start “as soon as possible when the time is ripe,” he said.
“The internationalization of the securities market will benefit the whole nation and overseas companies are highly motivated,” Xu said.
Shanghai, home to one of China’s two stock exchanges, is luring overseas companies to list as part of the local government’s drive to make the city a global financial center by 2020. HSBC Holdings Plc, Coca-Cola Co. (KO) and NYSE Euronext are among the multinational companies that have expressed interest in selling shares to investors in China. Shanghai, the nation’s financial hub, has been contacted by foreign companies in the finance, telecommunications, consumer goods and manufacturing industries, Fang Xinghai, head of the city’s financial services office, said in a May 2010 interview.
Listing in China would let foreign companies benefit from higher valuations and give them access to Chinese currency to fund their expansion in the world’s second-biggest economy, Arjuna Mahendran, Singapore-based head of investment strategy for Asia at HSBC Private Bank, overseeing $460 billion globally, said in a June interview…
Xu said the Shanghai bourse has set no priority on which foreign companies can list first, refuting media reports that so-called red-chips, or overseas-incorporated Chinese businesses listed in Hong Kong, would be first. Hong Kong-listed Cnooc Ltd., China’s largest offshore energy producer, would sell stock if it received regulatory clearance, Chairman Fu Chengyu said in March.
Companies seeking to list on the international board should have a market value of more than 30 billion yuan ($4.7 billion) and combined three-year net income of more than 3 billion yuan, the 21st Century Business Herald reported in April, citing a draft plan. Ten companies may be allowed to sell shares initially, according to the report.
“We have no plan for the first batch of companies to be listed or how many there will be in the first batch,” Xu said. “We don’t give priority to whether foreign companies or red- chip companies should be listed first. Whoever is ripe will get listed first.”…
There are about 104 million investors in China, including mutual funds, institutional investors and 85 million individuals, the Shanghai exchange said.
“China and its capital markets don’t lack money,” Xu said. “Once the companies are listed, it will have a huge advertisement effect.”
Basically this means that China wants to local investors to diversify.
On the other hand, this also allows foreign companies to tap on Chinese savings.
While this should be seen as substantially a positive development, this may not be enough as China ought to open more her stock markets to foreigners and not just to allow trading of foreign shares.
Cross listing with her neighbors may even seem better.
And another thing, Chinese equity investors represent about 8% of the population which is substantially more than the Philippines with about less than 1%.
Nevertheless, to wean dependence away from the banking system, capital markets in Asia will need, not only to grow, but to modernize, deepen and outperform the world.
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