News reports say that in a July meeting the China Securities Regulatory Commission (CSRC) discussed setting up a board to allow overseas companies to commence trading on the Shanghai exchange.
This news will be of particular interest to ‘red-chip’ companies. Those companies based in China, but incorporated overseas. China Mobile’s (0941 – the worlds biggest mobile operator by SUBS) parent company is domiciled in Beijing, but the operator itself is listed in Hong Kong. There are rumors that the company is planning to list A-shares (mainland shares) once a framework is in place.
One other company expected to follow suit is CNOOC (HK: 0883), China’s third largest oil company.
1. For companies planning to expand in China, this move will help bring local cash on-board, as well as increase the awareness of local investors.
2. Sources say that the minimum market cap for overseas companies planning to list will be US$7.3bn. Opening the market to large corporations will have a potentially stabilizing effect on a market in which some are concerned about the appearance of bubbles.
In a previous post on Yasheng Huang’s capitalism with Chinese Characteristics (https://ravendragon.wordpress.com/2009/07/23/hello-world/) we discussed the professor’s opinion that there is nothing magical about Chinese growth. He explains that access to capital is one of the essential ingredients for a company’s growth. In his first chapter, Huang spends a lot of time describing Lenovo. He says that despite its Chinese roots, the company’s growth was underpinned by a foreign incorporation, and access to Hong Kong’s capital markets.