SHANGHAI - Chinese companies seeking a mainland listing may wait for up to five years as regulators maintain a tight grip on supply concerns, prompting some to turn to Hong Kong for fund-raising, analysts at Ernst & Young said on Tuesday.
They estimated that over 800 Chinese companies are currently seeking approvals for a listing on the Shanghai or Shenzhen exchange, seeking to raise a total of around 500 billion yuan (US$80 billion).
"Many Chinese companies are considering listing in Hong Kong because if they wait for another 4-5 years, their growth would be constrained due to funding shortages," Zhehui Tang, partner at Ernst & Young's China venture, told reporters at a briefing in Shanghai.
No Chinese company has listed on the mainland market since auto parts maker Zhejiang Shibao debuted in Shenzhen on Nov 4, which analysts say is a signal that the China Securities Regulatory Commission (CSRC) is refraining from handing out the final go-ahead due to worries that additional supply would further hurt the stock market.
The mainland market is struggling regain its footing, with the CSI300 Index of China's 300 biggest companies virtually flat this year after a 25 per cent tumble last year and a 13 per cent slump in 2010.
To deal with the mounting backlog of listing applications, the CSRC is considering lowering the threshold for mainland companies to list in Hong Kong, and will publish detailed rules as soon as possible, the official China Securities Journal reported on Monday.
Under current CSRC rules, Chinese companies applying for a Hong Kong stock exchange listing must have at least 400 million yuan in net assets, plan to raise US$50 million or more, and must generate a minimum of 60 million yuan in annual net profit.
The securities regulator is also encouraging companies to raise cash through debt markets or over-the-counter (OTC) equity markets, according to local media reports.
During the first 10 months of the year, Chinese companies raised a total of 103.4 billion yuan via listings in the mainland market, down over 60 per cent compared with the whole of 2011, according to CSRC data. -- REUTERS
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