(Yicai Global) June 1 -- It is premature to implement such rules as the listing of firms with weighted voting rights, known as dual class share structures, and pre-revenue biotech companies on the Chinese mainland stock exchanges, warned the chairman of National Council for Social Security Fund today.
Speaking at a forum organized by Hong Kong Exchanges and Clearing, HKEX, on the future of Hong Kong's capital markets, Jiwei Lou said that conditions for being unprofitable or pre-revenue vary from time to time and operability of such rules in the Chinese mainland is limited.
However, the new China Depositary Receipt, or CDR, system unveiled in the Chinese mainland enables financially sound companies to choose suitable capital markets for themselves, he added. Firms can opt for either Hong Kong or the Chinese mainland markets, and investors will benefit from their listing, he said.
The financing aspects of capital markets in Hong Kong is unparalleled in the world, Jiwei added. The number of Chinese mainland companies listed on the Hong Kong Stock Exchange accounts for almost half of the total. Their capitalization amounts to about 60 percent, while their transaction volume reaches nearly 70 percent. With the introduction of the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect, the interaction and transaction volume will further climb in the future.
However, some aspects of both Connect programs still need improvements on the Hong Kong side, Jiwei said. The total number of days for the southbound Stock Connect transactions is shorter than that of the northbound one by 20 days. Both parties need to coordinate to increase the number of transaction days, he suggested. Moreover, the time for the Stock Connect transactions is shorter than that of the Hong Kong Stock Market by 1.5 hours. The transaction times should be consistent, Jiwei said.
The stock markets in the Chinese mainland and Hong Kong should also shorten the trading suspension period, during which many investors are tied up, Jiwei said. China's A-share market strictly prohibits buy-back by companies with abundant cash while Hong Kong allows it. It is better to allow buy-back, he suggested.
Among the forum speakers today were Zhou Xiaochuan, former central bank governor, Jiang Yang, vice president of China Securities Regulatory Commission, and Huang Qifan, deputy director of finance and economy commission of National People's Congress.
Editor: Mevlut Katik