Foreign Companies to List Shares in Shanghai

06-May-2011

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.







By Gordon Chang,  Forbes Blog,

China securities regulators have compiled a list of 10 companies that will be allowed to list shares on the pending international board of the Shanghai Stock Exchange, according to an article in a leading Chinese business newspaper on Friday.

The 21st Century Business Herald also reports that the regulators’ list includes Coca-Cola, Procter & Gamble, HSBC, Shell, and Unilever.  General Electric has said it would like to sell shares in China, but the American giant was not in the group of companies mentioned by the business paper.

The paper did say that “Red Chips” China Mobile and China National Offshore Oil Corp. are in the favored group of ten.  Red Chips are Hong Kong-listed offshore subsidiaries of Chinese state-owned enterprises.  They are considered “foreign” for purposes of Chinese law.

Of the 90 or so Red Chips, only about 10 meet stringent listing requirements outlined in the paper.  Companies, according to the report, will be eligible for listing if they have a market capitalization of at least 30 billion yuan and have a combined net profit of at least 3 billion yuan in the three years preceding the listing.  In addition, a listing candidate must have reported a profit of at least 1 billion yuan in the preceding 12 months.

Analysts expect the first listing to occur in the second half of this year.  Red Chips, some believe, will get the first nods.

The proposed international board was first announced in 2009 as part of initiatives to internationalize the renminbi and make Shanghai a global financial center.  The launch of the international board, however, has been repeatedly delayed for one reason after another.  Stock exchange officials refused to confirm the story in the 21st Century Business Herald.  So will the Shanghai bourse actually go ahead with international listings this year?

As an initial matter, it was a good sign that the China Banking Regulatory Commission in an April 19 report discussed three foreign banks—HSBC, Standard Chartered, and Bank of East Asia—listing in China.

Moreover, conditions now favor the quick launch of the international board.  In past months, for instance, the exchange postponed international listings because officials were concerned that local investors would switch their funds from domestic stocks to newly listed foreign ones.  In 2010, the Shanghai Composite fell 14.3%, making it the third-worst performing index in the world.  This year, investors have sent the market up 7.2%, and this turnaround should help alleviate official concerns.

More important, the listing of foreign shares can, at the margins, help alleviate China’s most serious economic problem: too much money, otherwise known as inflation.  Foreign companies will no longer need to aggravate Beijing’s money-supply management problems by bringing into China foreign exchange to support their domestic operations.  In the future, they will be able to raise renminbi by selling equity on the Shanghai Stock Exchange instead.

Moreover, companies can, with the approval of the State Administration of Foreign Exchange, take the proceeds of their listings out of China.  It is not inconceivable that when inflation gets worse—notice I didn’t use the word “if”—Beijing will be encouraging companies to take their newly raised renminbi and ship it abroad.

Apparently, officials now perceive liberalization to further the country’s goals instead of undermining them.  Given the stagnation and even reversal of economic reform over the last several years, this is indeed a happy moment for the foreign business community.

So here’s a prediction: Spiraling inflation will be triggering calls for lots of long-postponed economic restructuring in the coming months, starting with the delayed international board of the Shanghai exchange.

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