More cooperative opportunities will arise in capital markets in China and Japan as ties between the two countries strengthen due to improving economic co-development, financial leaders have said.

"The securities industry cooperation between the two countries can be improved in many fields and requires both sides to make an effort to promote deeper reforms based on a expected stable and long-term dialogue platform," Li Jiange, chairman of China International Capital Co, told China Daily at the Eighth Beijing-Tokyo Forum.

"More capital from Japan is welcome in China to enjoy the fruits of Chinese economic growth."

Following Monday's talks, economists from both countries agreed China-Japan economic and trade relations have a great opportunity at a time when the European sovereign debt crisis is threatening the world's economic growth.

Bank of Japan Deputy Governor Hirohide Yamaguchi said as the global financial system is under the risk of turbulence, capital market stabilization in Asia is much more important.

"It needs further regional cooperation to maintain the value of national assets as well as broaden mutual investments," Yamaguchi said.

President of the China Institute for Reform and Development Chi Fulin said Japanese securities companies entered the Chinese market about 30 years ago, "but Japanese capital participated less in China's fast growing economy in the past decades".

As of June 22 the value of shares transacted in the Tokyo Stock Exchange had reached $3.4 trillion and accounted for 7.3 percent of the total share value in all the world's exchanges, according to Li, the CICC chairman.

However, by the end of June there were only two Chinese companies listed on the Tokyo Stock Exchange.

Securities companies from China and Japan can cooperate through joint ventures, as the shareholding for foreign capital in Chinese securities institutions has been lifted to 49 percent, up from 33 percent in May, Li said.

He said companies from both sides can design creative financial instruments together, such as the exchange-traded funds, which can improve mutual investments in capital markets.

The direct conversion between renminbi and Japanese yen started on June 1. In the past month, foreign exchange trading between the two currencies has been more active than expected, increasing market demand for the relative financial derivatives, including renminbi futures and options, analysts said.

Toshiro Mutoh, chairman of Daiwa Institute of Research and former vice-president of the Bank of Japan, said the Japanese government is working with Chinese experts to expand capital transactions and investment channels for renminbi.

"In the near future, the mutual investment mechanism in the bond market is expected to be built, providing opportunities for investors to inject money into corporate bonds and support economic growth," he said.

Web link: http://www.chinadaily.com.cn/cndy/2012-07/04/content_15546899.htm

IPO activities in the A-share market may reverse their poor performance seen in the first half of the year and raise as much as 220 billion yuan ($34.6 billion) in 2012 as macroeconomic conditions improve in the second half, Ernst & Young said on Tuesday.

Terence Ho, partner and Ernst & Young's IPO leader in China, estimated the A-share market will see as many as 300 IPOs this year and that such offerings will raise twice as much capital in the second half of the year as they did in the first half.

In the first six months of this year, IPO activities raised 73 billion yuan, 100 billion yuan less than in the same period of last year. The first half of this year saw 104 IPOs, 63 fewer year-on-year, according to an Ernst & Young research report.

That weak performance contributed to the general global decline in IPO activities in the first half of the year. During that period, the amount of capital raised through such offerings was down 47 percent year-on-year.

The Hong Kong market was hit even harder. In the first half of the year, the amount of capital raised through IPOs there decreased by more than 80 percent year-on-year.

In the Chinese mainland, companies were being listed at lower prices, a result in part of a series of policies the China Securities Regulatory Commission issued this year to subject IPOs to stricter supervision. Among the changes were measures meant to place limits on price-to-earnings ratios and issuing prices.

Twenty-seven IPOs have occurred since the new policies took effect and the average price-to-earnings ratio among them was 31, down from the average ratio of 48 recorded for 2011.

"Although that's still above the world average, it's a reasonable level considering China's still-rapid economic growth and the different reference standards that are used for company profits when price-to-earnings ratios are calculated," Ho said.

Ho said few large IPOs took place in the first half of the year, "but the situation will improve in the second half", and between nine or 10 big IPOs will take place in the second half of the year.

"Pushing forward the listing process for State-owned enterprises is a priority for China's national assets watchdog," he said.
Although Chinese IPOs are likely to occur more frequently and will raise more capital in the second half of the year, those outcomes depend greatly on how quickly securities regulators approve the offerings.

"And the total amount of capital raised will still be smaller than in 2011," Ho said.

Ernst & Young's prediction was similar to a forecast that appeared in a report by PricewaterhouseCoopers on Tuesday, which said between 200 and 250 IPOs will take place this year, raising from 200 billion yuan to 250 billion yuan.

"China's capital market needs to provide more diversified financing channels, not only in the stock market but also in the renminbi bond market, in order to support the transformation of the economic structure and to strengthen China's influence in the international financial market," said Frank Lyn, PwC China markets leader.

According to Ernst & Young's report, the Shenzhen Stock Exchange registered more IPOs than any other stock exchanges in the world in the first six months of this year. But Nasdaq, buoyed by Facebook's $16 billion IPO, raised the most capital.

The report also estimated the Hong Kong market will raise HK$190 billion ($24.5 billion) in capital this year, down from the HK$270 billion raised in 2011.

Web link: http://europe.chinadaily.com.cn/business/2012-07/04/content_15547441.htm