Investment Q & A (12): What is the full circulation of H shares? │ 脱苦海

Q: What is the full circulation of H shares? Will it really make the stock market rise?

On December 29, 2017, the China Securities Regulatory Commission announced the deepening of the overseas listing reform, and implemented the pilot program for the full circulation of H shares. The first batch of pilot enterprises did not exceed three, and the promotion was carried out in a “mature one, one launch one” mode. There is no timetable. The China Securities Regulatory Commission did not announce the list of pilot enterprises. The pilot enterprise conditions include:

  • The existing share structure is relatively simple and the market value is not less than HK$1 billion;
  • Comply with foreign investment access, state-owned assets, national security and other requirements;
  • The industry is in line with the development concept of innovation, coordination, green, openness and sharing, and supports the “One Belt, One Road” national policy and representative quality enterprises;
  • Corporate internal decision-making procedures are compliant.

To understand what is the full circulation of H shares, we must first understand the current situation of H shares. According to the Hong Kong Stock Exchange Listing Rules, the following terms are defined as:

  • “Domestic Shares” means shares issued by Chinese issuers under Chinese law, denominated in Renminbi and subscribed in Renminbi.
  • ” “”Foreign Shares”” (外股股) means a stock issued by a Chinese issuer under the laws of the PRC, denominated in Renminbi and subscribed in a currency other than Renminbi
  • “H Shares” means the overseas listed foreign shares listed on the Exchange.

Only foreign shares are circulated on the Hong Kong Stock Exchange. Domestic shares cannot be circulated on the Hong Kong Stock Exchange. They can only be transferred between Chinese legal persons or natural persons, qualified foreign institutional investors or strategic investors. In short, they are “not in circulation.” “.” Under the current H-share listing structure, H shares issued in the Hong Kong market after listing can be freely circulated. For the pre-IPO shares, except for the foreign investment in the company, it is recognized as a “foreign share” and can be transferred. Except for the circulation of H shares, the shares held by the remaining domestic shareholders were all identified as “domestic shares” and could not be cashed out in the Hong Kong market.

The full circulation of H shares refers to the legal person shares and state-owned shares held by mainland enterprises listed in Hong Kong, and all of them are converted into H shares for trading. At present, if a company has only a H-share listing platform and no A-share listing, if a major shareholder wants to reduce its domestic shares, it can only reduce its holdings after the A-share listing has passed the lock-up period. As long as the H shares are fully circulated, domestic shares can be reduced in the H-share market.

Since October 2005, CCB has listed in Hong Kong in the form of full circulation of H shares, and there have been no cases of full H shares in circulation for many years. At present, there are 152 H shares, and 152 are not fully circulated. The market value of uncirculated shares is 2.58 trillion yuan, which is 2.3 times the market value of the circulating shares. That is, the current Hong Kong stock market value is about 8%. Among them, more than 70% of the 74 shares are not in circulation, Chinalco International has the largest share, 85% of the shares are not in circulation, and China Telecom has 82%. Once fully circulated, the market value will jump from the current 51.6 billion yuan to more than 301 billion yuan. . Li Xiaojia, chief executive of the Hong Kong Stock Exchange, said that the full circulation of H shares involves three types of companies.

  1. If H shares are listed before 2000, it is necessary for Hong Kong regulators to formulate corresponding regulations and consider the opinions of existing H shareholders.
  2. Most of the H-share companies listed after 2006 have already stated in the company’s articles of association: they can apply for full-circulation transactions after the policy is released.
  3. Companies that have not yet listed require the mainland authorities to issue policy permits.

The influence of the full circulation of H shares on the Hong Kong stock market has polarized opinions. It is considered that it is beneficial to believe that the H-shares are fully circulated to the interests of the major shareholders of the Mainland and the minority shareholders of Hong Kong. Strengthen management; on the other hand, the full circulation of H shares makes it possible for major shareholders to reduce their holdings, which has a negative impact on share price performance.

As for the author, I believe that I finally found an easy-to-understand reason to look at the stock market, that is, Hong Kong’s financial status in the country has risen to a higher level, especially the HKEx will benefit from the long-term increase in turnover. The market is already speculating that those companies will benefit from the full circulation of H shares, and BOC International has listed a list for reference:

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