BIZCHINA / Top Biz News
Red chips may be able to sell shares directly
(Shanghai Daily)
Updated: 2007-03-10 14:23
China may prefer to allow Hong Kong-incorporated mainland firms to issue
yuan-backed shares directly rather than for them to float Chinese
Depositary Receipts (CDRs), the top stock regulator has said.
"Now we believe a better method (for red chips to return) is allowing
them to sell A shares directly," Shang Fulin, chairman of the China
Securities Regulatory Commission, was quoted yesterday by state media as
saying.
CDRs "involve a lot of aspects and are more complicated, so we are
inclined to adopting a simple and direct plan. That is letting them list
on the A share market directly," Shang said when he attended the annual
meeting of the National People's Congress, China's top legislature, in
Beijing.
The CSRC is working with the Hong Kong stock regulator and the city's
exchange to arrange the return of red-chip firms, he was quoted as saying.
"It's better for the big-cap enterprises to sell A shares, which local
investors are more familiar with, to ensure the success of their mainland
issues," said Li Zhi, a Hualin Securities Co analyst. "CDRs are new and a
bit hard to be understood for the under-educated mainland investors."
The Shanghai Stock Exchange said last month that it plans to allow the
so-called red chips to sell shares on its bourse "soon" as part of
efforts to boost the market's size and quality.
Mainland citizens can't buy Hong Kong-listed red chips which are regarded
as foreign firms.
Industry analysts said that these red chips could list on the domestic
market through setting up a company on the mainland or by issuing CDRs.
China United Telecommunications Group listed in Shanghai in 2003 via
setting up a mainland company and indirectly acquiring a controlling
stake in the group's Hong Kong-listed unit.
Comparatively, CDRs, similar to American Depositary Receipts, will be
certificates issued by financial institutions representing a number of
foreign stocks traded on the mainland as local shares.
Red-chip firms, including China Mobile Ltd and PetroChina Co, have
reportedly been looking to launch CDRs.
(For more biz stories, please visit Industry Updates)
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