The Shanghai Stock Exchange said it was “basically ready” to let foreign issuers sell stocks, paving the way for companies from HSBC Holdings PLC to Coca-Cola Co to list in the world’s second-biggest equity market.
Trading should start “as soon as possible when the time is ripe,” Xu Ming (徐明), executive vice president in charge of the international stocks board, said in an interview at the exchange on Friday.
While there’s no timetable, the exchange has finished work on technological and regulatory requirements, Xu said.
The trading of foreign equities will mark the biggest change for China’s stock market in more than five years and add impetus to Shanghai’s drive to become a global financial center by 2020. It will broaden options for the nation’s 85 million individual investors who are restricted from buying shares abroad by China’s capital controls, with HSBC, Coca-Cola and NYSE Euronext among companies expressing interest in selling stock in Shanghai.
“The internationalization of the securities market will benefit the whole nation and overseas companies are highly motivated,” Xu said.
China is seeking to revive investor interest in an equities market that has slumped the past two years as the government raised interest rates and imposed curbs on property transactions to tame inflation and prevent asset bubbles. Overseas companies are barred from selling stock in China, though they are allowed to do so in Hong Kong.
Coca-Cola, the world’s largest soft-drink maker, plans to invest US$4 billion in China over three years from next year and announced in June that it was in talks to list in Shanghai. NYSE Euronext’s chief operating officer said in June last year it was “very interested” in selling shares.
HSBC chief executive officer Stuart Gulliver said in May it was his “desire” that Europe’s biggest bank be the first foreign financial institution to be listed on the Shanghai exchange. Paul Harris, a London-based spokesman for HSBC, said the company’s position is unchanged.
“They are all big companies and most of them are from the Fortune 500,” Xu said. “Many of the companies are already listed and some have multi-listings such as HSBC.”
He said the exchange is looking for companies that already have operations in China, an earnings history and strong corporate governance. Companies seeking to list on the international board should have a market value of more than 30 billion yuan (US$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.
“We favor companies of good quality, that are stable and are of fairly large scale,” Xu said. “We need to consider the protection of small investors and see if the operations of the companies carry risks.”
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.
“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.
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