CSRC flags looser offshore listing rules

Chinese corporates could soon see a further relaxation in regulations to make it easier for them to list in domestic markets, said the securities regulator.

Xiao Gang, chairman of the China Securities Regulatory Commission, said mainland companies would not need to be of a certain size or be profitable -- as they do no now -- before they could be listed in the mainland's two bourses. He was addressing the Asian Financial Forum yesterday in Hong Kong, 

This would follow similar benefits for Chinese companies that have been looking to list abroad, with restrictions such as a company needing to have Rmb400 million ($64.3 million) in net assets having been abolished since January 2013.

Similarly, mainland companies looking to list abroad is also expected to be made easier.

Although no new initiatives were announced yesterday, he said the procedure for companies looking to list abroad has been reduced from 13 steps to seven.

Meanwhile, Xiao highlighted the internationalisation of China’s capital markets, with the need to fine-tune schemes including the Shanghai-Hong Kong Stock Connect, qualified foreign institutional investor (QFII) and renminbi QFII mechanisms.

“We know that Hong Kong is the biggest offshore renminbi centre and we need to complete and improve the relevant mechanism so that cross-border investment can be more convenient,” Xiao said.

He conceded, however, that many investors remain unfamiliar with the two-month-old Stock Connect scheme. For example, mainland investors may struggle to interpret reports from Hong Kong-listed companies.

By the same token, Hong Kong and international investors may be unfamiliar with Chinese rules, such as a price limit imposed on stocks that swing over 10% during the day, as well as the ban on short-selling in China.

“Stock Connect is used as it recognises the differences between the two systems so we don’t have to change the two sides’ rules and habits,” said Xiao. “How can investors on both sides get used to the differences in investment rules? I think that will still take some time especially on how to further understand the other parties’ market.”

Trading volumes on the scheme remain relatively low. Total northbound trading (that of A-shares via Hong Kong) since the scheme’s launch reached Rmb81.6 billion as of January 16, or 27% of the Rmb300 billion aggregate quota.

Southbound demand has been even more tepid, with only Rmb18.1 billion, or 7%, of the aggregate Rmb250 billion in quota being used.