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Foreigners Allowed to Trade in Domestic Shares
Foreign investors will soon be encouraged to trade in China's domestic A-share market, in the country's first initiative to speed up the merger of its renminbi-based A-share and hard currency dominated B-share stock markets, Anthony Francis Neoh, chief adviser of the China Securities Regulatory Commission (CSRC), said Monday.
The merger is thought to be one of the biggest moves taken by China's top financial regulatory authorities to link its stock market with markets in the rest of the world as economic globalization continues to expand, he told the three-day 7th annual conference of the Asia Pacific Finance Association in Shanghai.
Any such merger could also mean that the long-awaited high-tech or second board market could finally be launched.
The conference is jointly sponsored by Shanghai Jiaotong University and Hong Kong Polytechnic University.
"We are now busy finding ways to establish an operating mechanism which will allow foreign investors to trade in China's A-share market, and so far the plan is still under detailed discussion,'' Neoh said.
Cheng Siwei, vice-chairman of the Standing Committee of the National People's Congress, echoed Neoh, saying the NPC is working to promote more laws to support the development of China's stock markets and venture investment.
Neoh indicated that the commission could adopt a qualified foreign institutional investor (QFII) pattern, as India's stock markets did, to allow foreign investors easy access to the domestic A-share market.
He said foreign investors' involvement in the renminbi-based A-share market would soon make the prices of the listed A shares and B shares the same, a prerequisite for the merger of the two markets.
But he refuted speculation that government intervention would be the major force propelling the planned merger, saying it would be a natural choice of the market-driven economy.
China's hard currency dominated B-share market has long been sluggish because of its own drawbacks since its establishment in the early 1990s, including its limited scale, low mobility, sharp fluctuations and limited access to foreign investors.
Before any merger, the country's A-share stock markets in Shenzhen and Shanghai will have to merge first.
But the final details have not yet been hammered out, said Neoh, adding that the long-awaited high-tech or second board stock market, which is designed mainly for small and medium-sized firms, could be launched in Shenzhen if the merger succeeds.
"But if it fails, there would be a possibility of setting up two parallel second boards at Shanghai and Shenzhen respectively,'' said Neoh.
Previously, speculation prevailed in the market, with claims that China plans to merge its current A-share markets at its only two money markets into one in Shanghai and establish its high-tech dominated B-share market in Shenzhen.
Neoh said the long-awaited second board market, to bolster China's high-tech industries, would be launched before the end of the year or the beginning of 2001.
And companies planning to list in the second market would have much lower requirements than their A-share counterparts, said Neoh.
According to the CSRC's regulations, companies planning to go public on the main board should be able to show at least three years' profits.
But Neoh said if companies in the planned second board should be able to show one years' profit is still under discussion.
As a means to strengthen quality control over the listed firms in the second board, CSRC plans to establish more rigid control over the underwriters of the shares.
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