Foreign investors set to expand A-share play

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The Beijing Stock Exchange opened for business on November 15, providing a new financing channel for many small and medium-sized enterprises in China (FAN JIASHAN / FOR CHINA DAILY)

The Beijing Stock Exchange, which opened for business on November 15, 2021, has attracted the local capital markets’ spotlight that hitherto shone on bigger bourses such as the Shanghai Stock Exchange.

Now foreign securities firms, which have played an increasingly bigger role in the A-share market, are unwilling to miss their chance to shine as well on the burgeoning bourse.

For instance, DBS Securities, from the stable of DBS of Singapore, is among the first few foreign securities firms to receive BSE membership. The firm is advancing IPO projects for the BSE, which are expected to enter the application phase next year.

The DBS management team said foreign investment banks are more experienced in seeking qualified foreign institutional investors or QFIIs, making more effective underwriting plans for issuers and attracting leading industry investors and strategic investors.

UBS Securities Co Ltd, linked to its parent UBS Group AG, figures among the first few of the 112 member securities firms of the BSE. Because UBS has received a licence to conduct secondary market brokerage businesses at the BSE, the firm would like to bring more overseas experiences to the Chinese market, said Eugene Qian, its chairman.

The BSE is built on the NEEQ Select, the highest tier of the eight-year-old National Equities Exchange and Quotations system. Of the first batch of 81 companies listed on the BSE, 87 per cent are from advanced manufacturing, modern services, high-tech services and strategic emerging industries.

To help small and medium-sized enterprises float successfully on the BSE, regulators have reduced the threshold. A company with market capitalisation estimated at 200 million yuan (£23.8 million) can apply to go public on the bourse. No stringent requirement has been set for BSE applicants’ profitability. They just need to demonstrate that they have invested a sufficient amount of money in research and development.

Guidelines for QFIIs to trade on the BSE took effect on its first trading day, which have paved the way for foreign investors.

Apart from bringing the experiences of exchanges from all over the world, JP Morgan will work to help companies float on the BSE and obtain refinancing, said Houston Huang, chief executive and head of investment banking at JP Morgan Securities (China) Co Ltd.

“We would like to introduce more institutional investors and overseas investors into the Chinese market, as JP Morgan has multiple channels and a rich client base,” Huang said. “It is our hope that this group of investors can take part in trading on the BSE via the QFII mechanism or other channels approved by regulators.”

JP Morgan announced in early August that the China Securities Regulatory Commission has approved the registration of JP Morgan International Finance Ltd with 100 per cent ownership of JP Morgan Securities (China) Co Ltd, making it the first foreign firm to fully own a securities venture in China.

Shortly after the decision to set up the BSE was announced, Morgan Stanley responded instantly and came up with a research report on September 2, informing investors of the basics of the new bourse and its understanding of the BSE’s positioning.

Integral to the construction of a multilevel capital market in China, the BSE will help stress direct financing. Some quality companies trading on the BSE are likely to migrate to the Shanghai and Shenzhen bourses in the future, Morgan Stanley said.

Previously published on Chinadaily.com.cn