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China may issue tougher overseas listing rule
By Zhang Ran (China Daily)
Updated: 2007-04-17 10:08 An unwritten rule, supposedly set by China's securities regulator allowing mainland-incorporated companies to list overseas only if they seek to raise over $1 billion, may queer the pitch of State-owned enterprises (SOEs) planning a similar listing. Though the China Securities Regulatory Commission (CSRC) yesterday refused to comment on a Financial Times report on the existence of the rule, industry insiders said the CSRC does indeed follow such a principle. "The rule was introduced in November. The CSRC hasn't approved any overseas listing since," said a local lawyer familiar with Hong Kong listing deals. "That's because it's very hard to meet the standard, except for large companies such as the Agricultural Bank of China." Financial Times reported that Chinese regulators waive the $1 billion principle in cases of simultaneous listings on the mainland. But Qiang Gaohou, a Beijing-based lawyer with the Global Law Office, said companies raising funds less than $1 billion are not allowed to issue H shares under any circumstances. "It's hard to tell whether the rule regarding that specific number exists. The CSRC is flexible," CSRC spokesman Liu Fuhua said yesterday. Liu said the regulator doesn't have such a rule on paper but that it is encouraging more companies to list in Shanghai and Shenzhen. The "rule", however, is expected to take its toll on the Hong Kong stock market. For years, the city has been a destination for mainland's State-owned companies to raise funds, especially when the mainland stock market was in a four-year slump. So far, 96 H-share companies have listed on the main board in the Hong Kong bourse while 45 smaller ones are listed on the GEM, the second board of the Hong Kong stock exchange. But the rapidly expanding mainland market after successful securities reforms since 2005 and a spurt of cash inflow into mainland bourses is increasingly creating a suitable environment for companies to issue A shares. On April 10, the total value of the mainland market hit 13.77 trillion yuan, for the first time exceeding Hong Kong's 13.69 trillion yuan. Until November, the CSRC had been following the so-called "4,5,6 rule" to approve SOEs for overseas listings. By this rule, a company must have net assets of over 400 million yuan and a net profit of over 60 million yuan if it is to list overseas. The companies were also required to raise over $50 million in an overseas initial public offering in order to list. "The current stipulation of $1 billion is very restrictive compared with the former target of $50 million," Qiang said. (For more biz stories, please visit Industries)
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