By Frederik Balfour (Business Week)
Updated: 2007-01-26 11:41

http://www.businessweek.com/globalbiz/content/jan2007/gb20070123_012133.htm?campaign_id=rss_daily

Chinese Premier Wen Jiabao and Beijing's financial mandarins recently held a high-level session to map the outlines of Chinese market reform for the next few years. The two-day session that ended Jan. 20 offered a rare glimpse into the priorities of Chinese officialdom when it comes to the evolution of domestic stock markets, foreign exchange reserve management, and currency policy.

While the list of priorities set out by the Financial Work Conference (a meeting held once every five years) is neither definitive nor exhaustive, it provides a good backdrop against which one can better read what's in store for the rest of 2007. Here are five trends to watch in China's financial sector.

A-Share Offerings Galore

Any way you cut it, last year was a stellar one for Chinese companies. They managed to raise $38.9 billion with initial and secondary share offerings in Hong Kong and other overseas exchanges. Dual listings at the Hong Kong Stock Exchange and the bourse in Shanghai were also all the rage. November saw the world's largest-ever IPO, as Industrial & Commercial Bank of China (ICBC) raised $22 billion in Shanghai and Hong Kong.

This year, count on several of China's most attractive companies already trading on overseas exchanges to tap the so-called A-share market at the two mainland exchanges in Shanghai and Shenzhen. (This market is primarily open to local investors, though "qualified" foreign institutional investors approved by the government can invest up to an annual $9 billion in these stocks.)

China Mobile (CHL), the world's largest mobile-phone company, which just announced its first foreign acquisition—of Pakistan-based Paktel—is expected to raise money in the first half of 2007, according to Chinese media reports.

Others expected to offer mainland investors share sales include Ping An Insurance; PetroChina (PTR); Aluminum Corporation of China (ACH), better known as Chalco; and China Construction Bank, which had a successful IPO in Hong Kong in late 2005. Red-chip companies—Hong Kong-based subsidiaries of mainland companies—will also list on China exchanges for the first time, giving domestic investors a chance, for the first time, to diversify into foreign assets.

The A-share IPO pipeline is bulging to such an extent that it is expected to exceed the amount of money raised by Chinese companies in Hong Kong for the first time in 2007, according to JP Morgan (JPM). The investment bank estimates that $25 billion to $30 billion will be raised on mainland exchanges, compared to $20 billion to $25 billion in Hong Kong.

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