London faces fight for Chinese listings

SHARES in Air China began trading today on the main board of the London Stock Exchange (LSE), the first major Chinese company to do so in more than four years.

The listing is a coup for the LSE, amid heightened competition between the world's premier exchanges for business from the fast-growing Chinese economy.

Before Air China touched down, just five mainland groups had listed on the LSE's main board, the last of which was Sinopec in October 2000. In the US, the much bigger NYSE has attracted 16 Chinese corporations, while the tech-laced Nasdaq claims 13.

'For listing venues this is World War Three. They've got to get these big companies listed, in particular the Chinese companies,' says Matthew Bersani, a capital markets lawyer with Shearman & Sterling in Hong Kong.

Air China, which is raising £557m for expansion, is also listing in Hong Kong, where its shares rose 6% above their offer price today. The company is using the same prospectus for both as the regulatory environment in the City and former British colony are similar.

'This is a telling advantage we have, especially vis-à-vis New York,î said spokesman Richard Webster-Smith, at the LSE which on Monday spurned a £1.35bn takeover offer from Deutsche Borse. 'They still have to deal with two regulators, but to issue just one document does save them time and expense.'

LSE executives also talk up London as a more international market and one that is not affected by the requirements of the US market post-Enron regulatory framework, especially the Sarbanes-Oxley Act.

The regulatory framework may be particularly critical for Chinese companies as most observers suggest they are used to a laxer environment at home, and investors need to be cautious.

Singapore-listed China Aviation Oil, which supplies most of China's jet fuel, recently stunned investors by admitting crippling derivatives losses. Executives now face a criminal investigation.

The LSE clearly has some ground to make up in the China fight. 'The US remains the biggest, deepest, most important capital market in the world,' says Bersani. 'If you are doing a deal of $1bn (£520m) or more, in general access to that market is considered critical.'