Bankers warn watchdog poised to get tough on back-door listings

The China Securities Regulatory Commission (CSRC) shows no signs of loosening its restrictions over back-door listings by mainland companies in Hong Kong, despite a number of actual and speculated takeovers of Hong Kong-listed firms by mainland entities.

Merchant bankers have warned that other companies trying to seek back-door listings, such as the example set this week by the Yunnan provincial government and its proposed takeover of Hansom Holdings, could be punished by the regulators.

They also criticised the Securities and Futures Commission (SFC) for setting a bad precedent by taking no further action in the Hansom case, where the Yunnan government-led consortium failed to disclose its takeover intentions during previous deals since 1993.

A commission spokesman said its joint policy with the exchange regarding back-door listings, established in 1993, remained unchanged.

The spirit behind the policy was to ensure such takeovers were not being used to circumvent requirements of exchange listing rules.

Mainland companies which sought to obtain backdoor listings without CSRC approval or follow the lead of Hansom in presenting a fait accompli deal would risk penalties and a backlash.

Speculation is now focused on whether other red-chip companies are following Hansom's example by slowly raising their minority stakes in Hong Kong-listed companies.