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Return of red chips likely in August

By Zhang Ran (China Daily)
Updated: 2007-06-26 06:44

The long-awaited return of red-chip companies - mainland firms which are
registered and listed overseas - to the domestic stock market could be
within the next two months, a source close to the securities watchdog
said yesterday.

A draft rule to facilitate their entry is being discussed and could be
announced in late July or early August, an official with the China
Securities Regulatory Commission (CSRC), who did not want to be named,
told China Daily.

The China Securities Journal has reported that the rule could be issued
as early as this weekend.

The first batch of eligible red chips such as China Mobile and CNOOC are
expected to be listed on the A-share market "depending on the market
situation", the CSRC official said.

To qualify for the listing, according to the draft document, a red chip's
shares must have been traded on the Hong Kong stock exchange for at least
one year, have a market capitalization of above HK$20 billion and a net
profit of at least HK$2 billion over three years.

The rule also requires a red chip company to have half of its profit
generated from its operating business on the mainland.

Based on Hong Kong stock exchange data at the end of May, 22 out of the
93 red chips meet the requirements to list on the mainland.

"Most of the big-cap red chips are State-owned enterprises (SOEs) that
have completed share-restructuring reforms, and this makes it much easier
for them to issue A shares on the mainland under the Company Law," Kevin
Shien, a partner of Deheng Law Offices, said.

Since the securities reform of the mainland stock market, Shanghai has
seen H-share large-caps such as Bank of China and the Industrial and
Commercial Bank of China to list on the mainland. H shares are companies
registered on the mainland and listed on the Hong Kong stock market.

The combined capitalization of SOEs and big financial firms now accounts
for 60 percent of the total market capitalization on the Shanghai and
Shenzhen bourses.

Liu Fuhua, a spokesman for the CSRC, said yesterday that the securities
watchdog is setting up a new division under the current supervisory
department for listed companies to keep tabs on listed SOEs and large
financial companies.

(For more biz stories, please visit Industry Updates)

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