Markets: HK Huddles, Int’l Board Balks 赴港上市仍障碍重重上海国际板推出再度押後

By newsdoug on January 17, 2012

New developments for HK, int'l stocks There are a couple of interesting stories out today on stock markets that specialize in China listings, one pointing to a potential surge in new offerings in Hong Kong while the other suggesting a long-delayed international board being set up in Shanghai won’t be launching anytime soon. Let’s start with the Hong Kong development, which is the more interesting of the two. Media are quoting a Chinese securities regulator saying his agency wants to streamline the process for Chinese companies to list in Hong Kong, a move aimed at helping smaller entrepreneurial companies to raise funds. (English article) On the surface this move looks interesting, as such companies do lack access to funds and are usually low on the domestic IPO list, where preference usually goes to former state-run companies with strong government ties. This kind of move by the regulator also looks like it could steal business from the New York stock markets, where the vehicle used by most Chinese companies to list is coming under scrutiny after a recent series of accounting scandals. There are 2 big problems with these assumptions. Perhaps most important, Hong Kong requires all companies that list on its main board to report at least 3 years of profits — a requirement that most US-listed Chinese firms would have failed at the time of their IPOs and a requirement that will make it hard for many smaller entrepreneurial firms to list in Hong Kong. Secondly, Hong Kong tends to be very conservative in terms of which listings it approves, meaning it is unlikely to approve many smaller, riskier companies that might become eligible for Hong Kong IPOs even if the Chinese regulator relaxes its rules. Moving on to the second topic, Shanghai’s highly anticipated but long delayed international board, the story is quite straightforward: investors shouldn’t expect anything anytime soon. Media are quoting Shanghai’s mayor saying the timing isn’t right for the launch of such a board, even though the Shanghai stock exchange said 2 months ago all preparations were ready. (English article) In this case the reason for this latest delay is obvious: China’s 2 main stock exchanges are both extremely weak right now, and officials won’t launch a new board that could drain further money from the domestic exchanges until things show signs of improving. If that’s the case, the international board’s launch could be delayed indefinitely and may not even occur this year at all, as China’s domestic markets show no signs of improving anytime soon.

Bottom line: Plans to let more Chinese firms list in Hong Kong are likely to have little or no impact, while launch of an international board in Shanghai could be delayed until late 2012 or even 2013.

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