HK cautious on London link for floats

THE Hong Kong Stock Exchange has distanced itself from reports that it is poised to sign a breakthrough deal with its London counterpart that would enable Chinese companies to float in Britain.

Although a spokesman for Hong Kong Exchanges and Clearing (HKEx) confirmed that the two groups had held several rounds of talks on the so-called 'fast-track' proposal, no conclusion was imminent.

'We have had several meetings [with the London Stock Exchange] and we are in the process of looking at the conditions for such a programme,' a spokesman for HKEx said today. 'I don't want to comment on the report, but at this point I am not aware that we are going to sign anything in the summer,' he added.

The comments came after a report in London suggested the pair were on the verge of sealing a deal for cross-listing that could clear the way for the programme to start within months. The new arrangement would broaden an existing but little-favoured tie-up between the LSE and HKEx that already allows investors in the two markets to trade each other's stocks.

In contrast to the downbeat note from Hong Kong, a spokesman for the LSE was quoted today as saying: 'Progress is very encouraging. Discussions with the regulators have been going very well, and they are happy with what's happening. We've only got the loose ends to tie up.'

If and when finalised, the cross-listing would enable newly-listed Chinese enterprises in Hong Kong to qualify automatically for a London listing. It would not apply to companies that are already listed.

The LSE, which opened talks with HKEx last year, is attempting to broaden its international appeal with several complementary initiatives to draw in greater numbers of foreign firms.

This week the LSE enticed its first European company to list on the alternative investment market using a ''fast track' route similar to the mechanism under discussion in Hong Kong. The LSE has also launched a major drive to encourage Indian companies to list in the City.

China makes a natural target for the LSE. Its economy is growing extremely rapidly as its markets are liberalised, and progressively brought into line with some Western commercial norms.

The Communist government is privatising hundreds of former State companies in a bid to boost efficiency and curb its own role in the economy. The country's domestic share market is already the second-largest in Asia after Japan. The HKEx move comes as restrictions barring foreigners from trading yuan-denominated shares are slowly being lifted.

When the exchanges' talks were first announced, LSE chief executive Clara Furse, said: 'It is natural for us to find ways to extend our reach across time zones.'