Red-chip companies, or mainland firms incorporated outside the
mainland and listed in Hong Kong, are expected to list on the
yuan-denominated A-share market by the end of this year, say Hong
Kong-based analysts.
If the A-share listing of these firms, at least 20 percent of
whose stake is held by the State or State-owned entities,
materializes, it will help cool down the red-hot Shanghai market by
providing more quality shares, they say.
"We believe mainland regulators will clear all legal hurdles
soon," said Ronald Wan, managing director and head of investment
banking at Bank of Communications Securities. "The listing for the
first (batch of) red chips will come by the end of the year."
Ricky Tam, chairman of Hong Kong Institution of Investors, also
said mainland regulators seem eager to attract more quality
companies to the A-share market.
"The listing of red chips on the mainland will provide
alternative investment channels for domestic punters," Tam said.
"That will definitely help cool down the frenzy in Shanghai. The
central government is eager to ease the excess liquidity in the
market."
There are about 85 red chips listed on the main board of the
Hong Kong bourse with a total market capitalization of about HK$3.1
billion.
Red chips have long been excluded from the domestic market
because their flotation involves technical complications.
China Mobile and PetroChina have the best chance of being in the
first batch of red chips listing on the mainland, given their huge
capitalization and reputation.
"China Mobile and PetroChina are very likely to be in the first
batch. Technically speaking, we don't see any hurdles delaying
their listing, especially with the State Council giving its
nod."
Market sources say five red chips have been given the green
light to float in the A-share market. These are China Mobile, China
Netcom Corp, CNOOC, Lenovo and an unidentified electronic
components producer.
But Tam cautioned that red chips could divert some capital away
from mainland shares. "Giants like China Mobile and PetroChina are
most likely to join the stream, but we doubt whether Lenovo is
large enough to be on the list," Tam said.
Red chips such as China Mobile have so far tried to tap the
mainland market through China depository receipts (CDRs). But
senior mainland officials now seem more inclined to A-share listing
rather than CDRs.
(China Daily May 10, 2007)