Shenhua plans dual listing of A, H shares
(Xinhua)
Updated: 2005-01-14 14:38

The Chinese mainland coal producer Shenhua Group may become the first mainland company to be simultaneously listed in Hong Kong Exchange (HKEx) and Shanghai Stock Exchange.

"Hopefully within this year, the first company will be able to simultaneously list its H share in Hong Kong and A shares in mainland," Paul Chow, chief executive of the HKEx said, without giving the specific company's name.

According to Shanghai Securities News, China Securities Regulatory Commission (CSRC) has given green light to Shenhua's application for dual listing.

The company plans to raise about US$5.2 billion (HK$40.56 billion), or 25 percent of its total share through selling shares on mainland market, HKEx and US stock market by means of American Depository Receipts (ADR).

However, observers say that there are still hurdles. Such a framework which will be applicable for companies to get listed in the two markets with different listing requirements and different regulations are still under working by HKEx and its mainland counterpart.

Chow admitted that different IPO (Initial Public Offering) period, different pricing structure are the two major issues to besolved.

Currently, book-building system to price new shares is still not in practice for A share, while it is long been adopted for international stock markets, including Hong Kong.

Due to some historical and structural reasons, such as A share's floatation restricts, A share company would be higher priced than H share even if two companies were identical.

Analysts can not help wondering that if H share were priced same as A share, would it be attractive to international investors. And if A share were priced according to H share, then it would be a disaster to A share market.

For the time being, the average A share price is higher than the average H share price for those A and H dual-listed companies. Investors have accepted such unfairness since these company issued A share and H share at different time, and mainland investors have limited investing channels while their total bank savings stand at about 10,000 billion yuan (US$1,219 billion).

But when simultaneous listing comes, and when there are more institutional investors and QFII (Qualified Foreign Institutional Investor) in the mainland market now, would such a price gap still be acceptable?

According to Mark Coggins, general manager of Financial Training company, when companies get dual-listed in the mainland market and other international market, it could attract international and domestic companies to the same company, which will help to propel the mainland stock market toward maturity based on international investing concept.

"There are growing pains, and there is a bright future," he said, adding simultaneous dual listing is the inevitable trend for the two stock markets.

Close