SSE denies intl board rumors

The Shanghai Stock Exchange (SSE) denied on Thursday rumors that it will set up a branch in the China (Shanghai) Pilot Free Trade Zone (FTZ) to launch an international board, after a plunge in the A-share market in the morning.

"The SSE hasn't considered launching the international board via the Shanghai pilot FTZ. No exact timeline for launching the board has been fixed," the stock exchange said in a report published on its website Thursday noon, quo-ting its replies to the Shanghai Securities News about the rumors.

As a result of concerns caused by the rumors, the Shanghai Composite Index dropped by around 1 percent on Thursday morning.

"Some local investors' reactions toward the rumors are understandable," Li Daxiao, director of research with Shenzhen-based Yingda Securities Co, told the Global Times Thursday.

Investors were easily -affected by rumors due to fear of the long-awaited international board possibly diverting capital invested in listed local companies on China's A-share market, said Li.

The State Council announced in 2009 it would push forward the establishment of the international board. Since then, the country's A-share markets have usually plunged whenever rumors about the exact timeline for the board were spread.

The international board would allow foreign firms to issue yuan-denominated stocks on the Chinese mainland, a move seen as crucial to the internationalization of the mainland capital markets.

However, Li believes it is still not a mature time for the launching of the board as the regulator has not restarted reviews of IPO applications by domestic firms.

The China Securities Regulatory Commission suspended approval of new IPOs in September 2012 in an effort to revive the country's sagging stock market.

"It is better to have the board be launched at a time when market liquidity is abundant," Li noted.

Lin Yixiang, chairman of TX Investment Consulting, also echoed Li's stance that it is not the right time now to launch an international board.

"The move would make it harder for domestic firms to raise funds," Lin told the Global Times Thursday.

Although some technical issues like shareholding limits could be resolved easier, the most urgent issue such as internationalization of the yuan and restricted foreign exchange would hold up the project, according to Li.

But both Li and Lin thought launching the internatio-nal board would likely be an -inevitable step for capital markets in China.

Li also suggested that -Chinese regulators learn from both failed and successful experiences in countries like Japan and the US, which have launched international boards in the past.

Japan set up an international board in the 1980s, and had 131 foreign companies listed on the Tokyo Stock Exchange (TSE) by the end of 1991.

But after the 1997 financial crisis, a large number of companies delisted, and the foreign division of TSE was finally shut down in April 2004.

Li suggested fixing a higher threshold for firms to join the international board during the initial period to avoid financial risks.