China's ongoing efforts to further open up its capital market, with the latest attempt to ease foreign strategic investment in listed firms, will help to improve the quality of A-share companies and inject more liquidity into the market, said experts.
Tender offers are acceptable for strategic investment under the revision. Private placements and share transfer agreements used to be the only two options for such investors. Meanwhile, foreign strategic investors are allowed to use shares of non-listed overseas companies as consideration shares for acquisition payment if they invest via private placements or tender offers.
According to Tian Xuan, associate dean of the PBC School of Finance of Tsinghua University, foreign investors will thus have more flexibility and payment options under the latest changes. Their investment costs will effectively be lowered, he said. Prior to the latest amendments, the proportion of shares of listed companies acquired by foreign investors through their first strategic investment was set at a minimum 10 percent. The bar has now been lowered to 5 percent.
He Yongqian, an MOC spokesperson, said at a news briefing in early November that the new rules will help to direct more quality foreign capital to Chinese listed companies, advance the development of industries and facilitate the sound and stable development of the Chinese capital market.