Shanghai Mayor Says Timing Not Right for Exchange’s International Board

Shanghai, China’s financial hub, signaled the delay of its international board two months after the city’s stock exchange said it was ready to allow overseas companies to list in the world’s third-biggest equity market.

The timing isn’t right to start the board allowing foreign issuers to sell shares in the city even as preparations remain smooth, Mayor Han Zheng said, without giving a reason. Shanghai will instead start an over-the-counter exchange soon, he said.

The benchmark Shanghai Composite Index (SHCOMP) has dropped 11 percent since the stock exchange said in November it’s “basically ready” to roll out the international board, paving the way for companies including HSBC Holdings Plc and Coca-Cola Co. to offer equity in the city. That compares with a 0.2 percent decline in the MSCI All Country World Index.

“We have a series of preparation work to do for the international board, including regulations,” Han told reporters yesterday after the annual meeting of the city’s legislature. “The timing is critical for the launch of the international board and at this moment, it is not a good time.”

The city will also strengthen property-market controls and focus on developing shipping services, Han, 57, said.

Shanghai, which wants to become a global financial center by 2020, has sought to allow the trading of foreign equities to broaden options for the nation’s 85 million individual investors who are restricted from buying shares abroad by capital controls.

‘Time is Ripe’

Trading on the international board should start “as soon as possible when the time is ripe,” Xu Ming, executive vice president in charge of the Shanghai Stock Exchange’s international stocks board, said in the November interview.

“The introduction of the international board is simply a matter of timing now and that will be highly related to the performance in the A-share market,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “Though the possibility of launching it in the near term is low, it will come out anyway because that will push ahead with the openness of China’s stock market and the process of yuan’s internationalization.”

NYSE Euronext has also expressed interest in selling stock in the city. Lawson Inc. (2651), a Tokyo-based convenience-store operator, wants to list in Shanghai within three years, becoming the first Japanese company on the international board, the Nikkei newspaper reported Jan. 9.

Property, Shipping

Shanghai plans to strengthen efforts to control the municipality’s property market this year as home prices are still “too high,” Han told reporters. The city will lower the standards for applications on affordable housing this year to cover more families and detailed policies will be released this quarter, the mayor said.

Shanghai, one of two cities in China that introduced a tax on properties last year, is joining national efforts to curb the real-estate market even as the economy cools. Chinese leaders affirmed last month they will stick with a campaign to bring down property prices even amid a “very grim” global outlook.

“We have some achievements on property-market control last year but the result is not solid enough,” said Han, who has been Shanghai’s mayor since 2003. “The controls will not be softened, the existing policies will not change, and the policies from the central economic work meeting will be fully implemented.”

China’s economy expanded 8.9 percent in the fourth quarter from a year earlier, the National Bureau of Statistics said today. Growth fell below 9 percent for the first time since mid- 2009, based on previous data, and compared with the 8.7 percent median forecast in a Bloomberg News survey of 26 economists.

Shanghai, which is also home to the world’s busiest container port, will also focus on developing marine-related services, including shipping financing, information services and freight forwarding, Han said yesterday.

The city will also gradually reduce internet fees as prices are too high, the mayor said. Wireless services will be expanded, he also said.

--Alfred Cang, with assistance from Zhang Shidong, Bonnie Cao, Jasmine Wang, Henry Sanderson and Michael Wei. Editor: Bloomberg News, Linus Chua

To contact the Bloomberg News staff for this story: Alfred Cang in Shanghai at acang@bloomberg.net

To contact the editor responsible for this story: Bloomberg News at schen37@bloomberg.net

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