June 2 – Chinese authorities are set to open the sluice gates of the country’s securities industry so that foreign companies can raise capital and list on the Shanghai stock exchange.
They also plan to allow local companies to scout globally for raising funds and listing in foreign stock exchanges, the Times of India reported.
China will let foreign investors take stakes in its publicly listed firms by buying their tradable A shares, part of an ongoing plan to do away with non-tradable State shares, according to Xinhua.
Foreign companies that want to take strategic stakes in listed Chinese firms will be able to do so by buying their non-tradable institutional State shares.
Under the State-share reform plan now being implemented, China is converting non-tradable shares, worth a collective US$250 billion, or about two-thirds of the total capitalization of China’s two stock markets, into regular tradable A shares.
Such A shares are now closed to most foreigners.
Foreign investors that take strategic stakes through A-share purchases will be subject to “lockup” periods — specified amounts of time that they must continue to hold the shares before being allowed to sell them — according to the reports.
The new rules will also stipulate that Chinese publicly traded companies with 25 percent or more of their shares held by a foreign investor will enjoy special treatment given to Sino-foreign joint ventures.
These are massive changes in a country, which has grown on the strength of direct foreign investment in manufacturing without allowing them to raise capital or list in local exchanges.
The government has also put an end to the system of Chinese companies floating subsidiaries overseas and using these subsidiaries to list shares in foreign stock exchanges three years back. The situation is now going to change dramatically.
NYSE Euronext Inc has been chosen to become the first foreign company to list in the Shanghai stock exchange. China’s Securities Regulatory Commission (CSRC) intends to send out a signal about its sense of liberalism by choosing an exchange company as the first listing candidate in Shanghai, sources said.