Timing of Shanghai foreign listings uncertain

By Soo Ai Peng and Wang Lan

TIANJIN, China (BestGrowthStock) – It is unclear when China will start letting foreign companies sell shares in Shanghai, a senior Shanghai government official said, suggesting the launch of an international board in the city has been postponed.

Fang Xinghai, Director-General of the Shanghai Financial Services Office, also told Reuters existing rules were an obstacle to introducing new products such as global exchange-traded funds (ETFs), another of the reforms the city has been planning.

“It will happen. Just in China, it’s very dangerous to predict a timeframe,” Fang, a U.S.-trained economist, said of the launch of the international board in an interview.

He was speaking in the northern Chinese port city of Tianjin late on Sunday ahead of a meeting of the World Economic Forum.

Fang had previously said China was expected to finish preparing rules allowing for foreign listings in Shanghai by the end of this year.

At least two dozen foreign companies, including HSBC (HSBA.L: )(0005.HK: ), which this year moved its global CEO to Hong Kong from London, have expressed an interest in seeking a listing on the Shanghai Stock Exchange.

China hopes the board for overseas firms could boost Shanghai’s international standing and broaden investment channels for the country’s growing yuan savings.

That is part of the government’s plans to develop Shanghai, known as the Paris of the East in the 1930s, into a global financial hub within the next decade to compete with the likes of New York and London.

UPDATING RULES “NOT EASY”

As part of that broader effort, Shanghai is also working on the country’s first cross-border exchange-traded fund, which will be based on stocks traded on the Hong Kong stock exchange.

But that, too, will take time, Fang said.

“The existing securities rules are seriously inadequate when it comes to cross-border trading,” Fang said.

“This is not an easy thing to do; to change the rules is not easy,” he added.

The foreign ETF will happen before the international board as the latter involves more complicated cross-border governance issues and bigger risks, James Liu, executive vice president of the Shanghai Stock Exchange, said in July.

China is also moving ahead with other steps to liberalise its financial system, particularly related to its currency, the yuan.

In August, it opened its domestic interbank bond market to some overseas banks that have accumulated yuan deposits.

It has also opened its capital account for a number of yuan-denominated transactions in Shanghai on a trial basis. Companies and banks will be encouraged to use yuan for overseas financing, foreign direct investment and other capital account transactions that are closely related to trade.

However, China must accelerate its financial reforms overall if Shanghai is to reach its aim of becoming a global financial center, Fang said.

“Decisions over capital allocation at this moment are still heavily influenced by government regulation,” he said.

“I would like to see this influence gradually lessened, and decisions to be a lot more based on market considerations.”

(Additional reporting by Reuters Insider; Editing by Jason Subler)

Timing of Shanghai foreign listings uncertain