The London Stock Exchange (LSE) is encouraging Chinese enterprises, whether State-owned or private, to apply for listing.

With ample international capital and rich financial expertise in London as well as lower exchange fees, the LSE is able to compete with other overseas stock exchanges such as New York and Hong Kong, said LSE chairman Chris Gibson-Smith yesterday in Beijing. This was his first official visit to China after taking the position a year ago.

"We can accept both large and small companies," he said.

Although large State-controlled companies are more active in finding overseas capital at this time, as the economy evolves more private companies are expected to enter the international capital market, he said.

To meet the growing demand, the LSE is scheduled to open a representative office in Hong Kong in the third quarter of this year, which would better serve its clients in the Asia-Pacific region, including mainland firms.

If the Hong Kong office performs well, then the LSE is considering opening another in the mainland, though that will require permission from the Chinese Government, said Gibson-Smith.

He has been meeting with Chinese regulators and companies during his visit here to reinforce the exchange's desire to help with the overseas listing process for domestic firms.

Though the LSE is still rather unfamiliar to many locals, it has been a popular choice among international companies. So far, about 450 international companies have been listed in London, among which 110 are from Asia and only five from China.

But the value of international equities in the LSE already totals US$3.5 trillion, taking up about 58 percent of the overall market value.

The exchanges in New York and Hong Kong are currently London's main competitors in terms of attracting Chinese companies.

The New York exchange has a stronger investment banking business, which attracts some mainland firms there, while Hong Kong, with its close link to the mainland, is a natural first choice for most mainland firms seeking overseas capital.

Between 1991 and 2003, mainland companies raised about US$27 billion by issuing H shares in Hong Kong.

But as the funding demand from Chinese companies grows in sync with the continuing boom expected for the next 10 years, other overseas exchanges such as the LSE will have more opportunities, said Gibson-Smith.

Presently, the LSE is also in discussions with the Hong Kong exchange to facilitate second listings by Chinese firms in London after their first listings in Hong Kong or vice versa, he said. No specific arrangement in this regard has been made so far, but the similarities shared by Hong Kong and London in legal system and market structure will make second or multiple listings more practical and economical for those with growing financing demands.

Insiders say some Chinese companies met with LSE officials recently, including Beijing Capital Group, which is planning an overseas listing for the entire group and has not yet determined which exchange it will choose.

(China Daily April 22, 2004)