Shanghai exchange in pact with Brazil bourse

SHANGHAI - The Shanghai Stock Exchange and BM&FBovespa SA, the operator of Latin America's biggest securities exchange, will sign an agreement that may lead to cross-listings of stocks, the Financial Times (FT) reported, citing an unidentified official with the Sao Paulo-based company.

Officials from both exchanges will sign a Memorandum of Understanding on Monday in Brazil, the FT said, citing the spokesman for BM&FBovespa.

Cross-listings would give Brazil's biggest companies, such as Vale SA, access to Chinese capital and allow them to be traded through the Asian day, the FT reported.

A spokesman at the Shanghai Stock Exchange, who declined to be identified because of company rules, confirmed that the two bourses will sign a memorandum to boost international cooperation and exchange information. He declined to say whether cross-listings would be included in the agreement. Telephone calls to BM&FBovespa's investor relations department in Sao Paulo outside business hours weren't answered.

"This would be hugely positive for Chinese stocks," said Michael Yoshikami, who oversees $1 billion at YCMNet Advisors in Walnut Creek, California. "It's positive anytime you can have cross-border trading in two of the fastest-growing economies in the world. It comes down to Brazil and China wanting more access to capital."

Shanghai, China's commercial hub, is striving to become a global financial center by 2020 and is seeking to attract the world's biggest companies for an international stocks board that the exchange plans to start this year. Cross-listings would also boost the international competitiveness of the exchange at a time when global exchanges are merging.

Deutsche Boerse's $9.53 billion takeover of New York-based NYSE Euronext was announced on Tuesday, less than a week after London Stock Exchange Group Plc agreed to purchase TMX Group Inc of Toronto for about $3.1 billion. In October, Singapore Exchange Ltd offered more than $8.3 billion for Sydney-based ASX Ltd, which runs the Australian stock market.

Shanghai is making preparations to add the international board to its stock exchange, and officials hope it will start this year, Shanghai Daily reported on Thursday. The city wants to allow residents to invest overseas directly, according to Shanghai Daily.

Shanghai has been contacted by foreign companies from the finance, telecommunications, consumer goods and manufacturing industries about selling shares in the city, Fang Xinghai, director-general of Shanghai's financial services office, said in May 2010.

Vale, the world's biggest exporter of iron ore, may seek a listing in Shanghai when it's possible, Chief Financial Officer Guilherme Cavalcanti, said on Dec 5. The company made its debut on the Hong Kong Stock Exchange on Dec 8, seeking to increase its profile in its biggest market. Petroleo Brasileiro SA is considering selling depository receipts in Hong Kong, the Ming Pao newspaper reported on Nov 16.

"Fifty percent of our sales are directed to Asia and almost 40 percent to China," Cavalcanti, said on Dec 8 in Hong Kong.

BM&FBovespa jumped the most in almost three months on Feb 9 on speculation industry takeovers may intensify. The exchange operator's shares slumped 25 percent from a record high in October through Wednesday on concern government measures to contain currency gains will hurt trading volume.

Bloomberg News

(China Daily 02/18/2011 page17)