Stocks News
- Broader role eyed for brokerage ventures
Date: 12-Oct-2007 Sources: (Shenzhen Daily)
REGULATORS will expand the business scope of foreign brokerage firms' joint ventures when the time is right, the country's chief securities regulator said Thursday.
Shang Fulin, chairman of the China Securities Regulatory Commission, also said the government would keep encouraging qualified companies to sell shares on the domestic stock market to reduce their reliance on bank loans as a source of capital.
Increasing the supply of shares could put the brakes on a long rally in the Shanghai stock market, which has risen almost 400 percent since the start of last year.
Speaking at a forum in Beijing, Shang said the government planned to increase the free float of shares of publicly traded companies.
Although most companies have completed reforms to make previously non-tradeable shares tradeable, they are subject to lock-up periods and other restrictions that mean only a small proportion of the shares actually are traded on the market.
Shang did not provide details on how the government planned to increase the free float of shares, or whether it would let firms end their lock-up periods early.
'Once the lock-up period passes, firms have the right to sell part of their shares as they see fit. But that's the companies' business,'he told reporters.
Jiang Jianrong, analyst at Shenyin & Wanguo Securities, said the government would find it difficult to increase the supply of freely traded shares enough in the short term to have much impact on the market.
'I don't think the government will shorten the lock-up periods for shares, as that would hurt its credibility,'she said.
In another step that could tilt the supply-demand balance, Shang said the government would expand the scope of the Qualified Foreign Institutional Investor (QFII) program.
China agreed in principle at trade talks with the United States in May to increase the size of the QFII program, which allows selected foreign firms to buy Chinese stocks, to US$30 billion from US$10 billion.
At the same talks, which were led on the U.S. side by Treasury Secretary Henry Paulson, China also promised to resume issuing licenses by the end of 2007 for foreign securities firms to form joint ventures.
China's eight foreign brokerage joint ventures currently can only underwrite stocks and bonds, broker bonds and foreign-currency B shares, and trade bonds for their own accounts.
They may not act as brokers for the red-hot domestic A-share market, with domestic brokerages reluctant to let foreign competitors encroach on their increasingly profitable turf.
Goldman Sachs, Morgan Stanley and UBS currently operate brokerage ventures in China, while several other foreign firms, including Credit Suisse, HSBC and Citigroup, are in talks with potential Chinese partners, sources have said.
Shang said he was keen to boost the size of China's underdeveloped 450 billion yuan (US$60 billion) corporate bond market. His agency recently assumed responsibility for overseeing debt issues by listed companies with tenors of at least 1 year.
'We will try to expand the size and proportion of our bond market (within the overall financial market) in as short a time as possible,'he said.
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