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Hong Kong: HK exchange feels the pinch

Increasing international competition for China listings, most notably between London’s Alternative Investment Market (AIM) and China’s domestic markets of Shanghai and Shenzhen, is squeezing market leader Hong Kong, say insiders.

Since an unofficial ban by the China Securities and Regulator Commission (CSRC) on most domestic Chinese companies seeking a listing overseas before a domestic offering, senior officials in the Hong Kong government and senior management in the Hong Kong Stock Exchange (SEHK) have been in something of a panic, say insiders, over the potential loss of what has been a hugely lucrative listings business from the mainland.

"The stock exchange and FSTB [Financial Services and Treasury Bureau] are paranoid about losing the China listings business," says an insider. "The exchange is facing massive pressure from the government to attract more foreign listings."

Their concern is understandable. The SEHK 2006 accounts reveal that fees generated from new listings totalled some $60 million for the year, a 13% increase on 2005. More significantly, it is the drive for new listings that also generates long-term growth in turnover-related income that accounts for the bulk of SEHK revenues – some $308 million in 2006.

Any prospect of losing the China listing goldmine is therefore unthinkable.

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