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China targets overseas-traded companies as IPO resumption looms
(Bloomberg)
Updated: 2006-02-10 11:23
China's securities regulator plans to favor listings by big and
overseas-traded companies once a ban on domestic share sales is lifted, aiming
to revive stock markets that reached eight-year lows last year.
The China Securities Regulatory Commission has proposed to relax some listing
rules and recommended allowing Chinese companies listed abroad to raise funds
locally by selling China Depositary Receipts, according to a draft document sent
to brokerages for consultation and obtained by Bloomberg News.
Many of China's biggest and most profitable companies, including PetroChina
Co. and China Mobile (Hong Kong) Ltd., are traded in Hong Kong and New York and
not in the mainland. China stopped domestic share sales in May to avoid a flood
of equity as companies pursued plans to make more than $200 billion of mostly
state-owned stock tradable.
"The government is encouraging quality companies to list domestically to
increase the attractiveness of the market," said Lu Jiehua, an analyst at
Shenyin Wanguo Securities Co. in Shanghai. "Regulators are working to resume
share sales soon, and I expect the ban to be lifted in the second quarter."
The Shanghai and Shenzhen stock exchanges were the world's fourth- and
third-worst performers in 2005 because the smaller, state-owned manufacturers
that dominate the markets weren't the driving force of the world's
fastest-growing major economy. The Shanghai Composite Index, which gained 9.3
percent this year, is still 43 percent below its 2001 peak.
Draft Rules
"Regulators should give certain preferential policies to help big, quality
companies list domestically,'' the commission said in the document, which was
sent to brokerages last month. Dai Biao, spokesman for the regulator, declined
to comment.
The draft rules scrap limits on the amount that can be raised in initial
public offerings, currently set at twice net assets, and on transactions with
affiliates, which are capped at 30 percent of annual sales under existing
regulations.
"The draft relaxes the rules on IPOs," Mao Haolie, who helps arrange share
sales at Everbright Securities Co. in Shanghai, said. ``It's a sign that
domestic share sales will resume soon.''
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