SFC Chairman Martin Wheatley said improved cross-border enforcement was his organization's top priority for the next three years. At present, the SFC has no cooperation agreement with the CSRC – as it does with other foreign securities regulators – which creates problems in terms of investigating mainland-based companies.
Furthermore, the CSRC is unable to take direct action on cases of market misconduct and has to rely on authorities such as the police to investigate. "Ultimately, legal changes will be needed to give the CSRC the same powers as other regulators," Wheatley said.
For Hong Kong, this cannot come soon enough. A third of the initial public offerings launched in Hong Kong last year were by mainland companies and this proportion is only expected to rise.
Following strong showings in Hong Kong by Hunan Nonferrous Metals, Tinaye Water and CMA Logistics, a host of other mainland IPOs are waiting in the pipeline, particularly in the property development and port operation sectors.
Dalian Port is aiming for a US$250 million offering, which will make it the second mainland port operator to list in Hong Kong after Xiamen International Port. However, Tianjin Port is expected to waste little time in bringing this total to three. Of the property groups eying a listing, Greentown China Holdings, based in Zhejiang province, stands out with plans for a US$600 million IPO.
The crown jewel of these investment opportunities is, of course, Bank of China, slated to list in Hong Kong next month. The most international of China's Big Four banks hopes to raise US$6-8 billion by selling 10-15% of its share capital.
Meanwhile, a number of other high profile companies were last month said to be preparing for Shanghai listings in anticipation of the re-launch of domestic share listings. State media reported that China International Capital Corp, Galaxy Securities and Citic Securities had all submitted proposals to underwrite an A-share offering by China Netcom.
China Mobile has also said it plans to list domestically once the regulators allow it.
CSRC reveals listing re-launch plan
The China Securities and Regulatory Commission said mainland listings would resume with the introduction of private placements which will allow companies to sell large amounts of share capital directly to certain investors. This will be followed by rights shares and finally initial public offerings. The move came as part of a series of measures, including changes encouraging listed firms to pay dividends, plans for a more market-oriented system of pricing and timing of additional share offerings, and alterations aimed at making it easier to sell corporate bonds. The CSRC said it would accept public comments on the new rules until April 22 but gave no indication when they would come into effect.
UBS brokerage deal close
A deal which will see UBS take a 20% stake in troubled brokerage Beijing Securities for US$112 million appeared to be inching closer towards final approval last month. A Financial Times report claimed the deal had got the go ahead was refuted by the China Securities Regulatory Commission, but further media reports quoted sources close to the deal as saying it was making good progress. Despite only having a minority stake, UBS is set to be granted management control of the venture.
CMB drops Merrill Lynch
China Merchants Bank removed Merrill Lynch from its advisory role on the Chinese bank's US$2 billion initial public offering because of a conflict of interest. The investment bank is also involved with a competing listing for the Industrial and Commercial Bank of China. This follows Goldman Sachs' being frozen out of ICBC's US$10 billion-plus IPO because of its role in the Bank of China listing.
No short-term listing plan
Bank of Communications has no plan to list shares in the mainland while limits on overseas investors remain, the bank's president, Zhang Jianguo, told a financial forum. Bocom doesn't wish to list A-shares under current conditions, as this would dilute the shareholding of HSBC, which owns almost 20% of the bank.
CCB denies poor disclosure
China Construction Bank denied accusations of poor disclosure in its first annual report since listing late last year. The report, which revealed a year-on-year fall in net profit to US$5.88 billion, prompted criticism from analysts. Goldman Sachs said CCB's disclosures were "disappointing", while Citigroup criticized the bank for not explaining differences in its actual and projected effective income tax rates as well as its losses on foreign currency trading. CCB said the lower tax rate came as a result of changes to tax deductions on staff expenses while foreign exchange losses were caused by the yuan's appreciations.
Ratings partnership proposed
Moody's Investors Service said it would take a 49% stake in China Chengxin International Credit Rating. The international ratings agency will purchase the shares from China Chengxin Credit Management and an affiliated entity, pending regulatory approval. The joint venture means Moody's can look at domestic as well as offshore capital market transactions involving Chinese firms.
Publisher poised for IPO
Liaoning Publishing Group, one of China's largest publishers, was given the go-ahead to list part of its operations in Hong Kong, the Financial Times reported. It is set to be the first listing by a Chinese publishing house, and suggests that governmental control will not necessarily hamper commercialization. Liaoning Publishing, which prints about 1,500 new titles a year, will not be able to list some parts of its business, such as editing departments.