| The continuous and rapid growth of China's national economy as well as the swift development of China's securities market has laid a good economic foundation for Red Chips'return to the A-share market. At the moment, nonetheless, the return of Red Chips will definitely bring about far-reaching influences on China's securities market, among which are a number of positive aspects. At the same time, however, there exist some realistic problems that we must encounter. It is thus necessary for us to investigate the return of Red Chips in a greater depth.Grounded on the current circumstances of China's securities market as well as the experiences relating to issuing and listing of previous shares of A+B and A+H, the return of the Red Chips will definitely face the realistic problems of market segmentation. In other words, prices of the same Red Chips Stock will vary between the stock exchange markets in the Mainland China and Hong Kong. Such an issue has always been a concern for the A-share investors and also the government's supervision departments. Thus, by reading a significant body of literature relating to market segmentation, this dissertation provides an in-depth explication of market segmentation and relevant theories, and then advance, synthesize, and summarize them into three interrelated theory chains, namely,"the theory of market segmentation","the theory of price gap of cross-listed companies", and"the theory of price discovery function of cross-listed companies". Building on these three theory chains, and integrating our investigation into the phenomena of segmentation of China's securities market and the market segmentation encountered by the return of Red Chips, this dissertation manages to propose a particular analytic framework concerning the China's securities market segmentation as well as the market segmentation encountered by the return of Red Chips.Due to the results of the theoretical framework, this dissertation, different from other previous research which had a bottleneck of merely relying on the experiences of issuing and listing of the A+B or A+H shares, manages to provide empirical evidence to support the views regarding the economic effects of the return of Red Chips in the context of market segmentation from a number of technical aspects. To begin with, it proposes the model of"long-distance relevance"relating to the return of Red Chips in the environment of market segmentation, on the basis of the comprehensive application of statistical analysis as well as the theories and approaches of R/S. Then, it analyses the index of Shanghai Composite and Red Chips between 1994 and 2008. The results ensure the relevant consistency between A-share market and Red Chips in Hong Kong as well as the growth between A-share market and the mature international market. This indicates that A-share has provided good market foundation on the return of Red Chips. On the other hand, it also suggests that A-share has market conditions for internationalisation. Also, the return of Red Chips will propel A-share market to orient to internationalisation. Next, it analyses and investigates the pricing mechanism of the return of Red Chips for the first time, in terms of the initially proposed framework and other regressive models in relation to China's securities market and the market segmentation encountered by the return of Red Chips. Subsequently, it proportionally divides the net asset profit rates of A-shares of the total company years between 1994 and 2007 into 20 components from low to high, and compare them with the stocks in the mature market of the same latitude in the USA as well as the relationship between the market net rates and the net asset profit rates of Red Chips in Hong Kong. In addition, it makes an overall comparison between Red Chip and A-share companies in terms of the financial performance and the corporate governance structure between 2002 and 2007. The results further confirms that the return of Red Chip companies with larger scale and better performance to the A-share market will benefit the overall quality of the listing of A-share companies and decrease the market bubbles. Moreover, it applies the random simulation of Monte Carlo and a simplified model to predicting and analysing the investment effects of the return of Red Chips on the stock investment composite on the part of the A-share investors. Again, the results further confirm that the return of Red Chips will undoubtedly increase the diversity of quality investment for investors. It will be beneficial to A-share investors in terms of the risk distribution under the premise that the expected profit rates of investment would not step down. As a result, the levels of the investors'welfare will be upgraded. At the same time, however, the issuing and offering prices of new stocks of Red Chips in the A-share market will to some extent be higher than those in Hong Kong under the current circumstances of market segmentation. Therefore, it is likely that the fortune will be transferred from A-share to Red Chip investors. As such, it is necessary to regulate both the IPO and newly listed prices of the returning Red Chips at reasonable levels. These ensure the market foundation of the return of Red Chips and the necessity and feasibility of the return. Also, it further suggests that the return of Red Chips as a significant event in its own right might reduce the extent of market segmentation in securities market between the Mainland China and Hong Kong. Through these empirical analyses, this dissertation further discusses the overall economic effects and the potential technical obstacles of the return of Red Chips in the context of market segmentation.Because"Pilot Measures on Initially-issued Shares in the Mainland China by the Listed Companies with Chinese holdings Overseas (Draft)"proposed by China's Securities Supervision Committee has not been formally issued and the return of Red Chips has not yet been initiated, this study indicates that the knowledge and understanding of the return of Red Chips remain at the level of strategy and operation to some degree or are surrounded by the function and perspective of departments in government. At the moment, however, China's securities market is in the process of adjustment due to the influence of the macro economic environment, there exist a number of struggles among government supervision departments and other function departments, Red Chip companies and market. It seems that the delay of the return of the significant Red Chips is due to the lack of overall strategic targets and related institutional arrangements. In order to ensure that the return of Red Chips can be smoothly initiated and China's securities market can experience long-term healthy development, this study further explores and strategically synthesize the certainty of the regression of Red Chips, based on our preceding theoretical discussion and economic effects analysis. Also, it makes an attempt to investigate and analyse the relevant obstacles at the macro and operational levels and propose some solutions regarding institutional arrangement. In particular, it is proposed in a reversion thinking that the"construction of the international board"of the A-share market should be initiated at a proper time to promote the return to Red Chips and to propel the long-term healthy development of China's securities Market. Subsequently, on the one hand, this dissertation proposes the strategic targets of the return of Red Chips in the environment of market segmentation at the macro level as well as the strategic steps and the ensuring measures of"three steps + one step", including strategic suggestions that the significant adjustment of the return of Red Chips and the executive decision rights can be upgraded to a higher institution in the government. On the other hand, this dissertation proposes the institutional arrangements relating to specific operations under the strategic ensuring measure in the context of market segmentation. Finally, this dissertation compares and analyses the three candidate models regarding the return of Red Chips in the current circumstances of controversial market segmentation. At the same time, this dissertation proposes a totally new idea for the returning model of Red Chips, i.e. transferring Red Chips to H-shares.This dissertation, grounded on the continuous and rapid economic growth of China's national economy and the swift development of China's securities market, attempts to explore the economic effects and the institutional arrangements required by the return of Red Chips in the context of market segmentation. It thus confirms the importance, necessity, urgency and practicality of the early return of Red Chips. It also provides the government administrative departments with effective theoretical support and feasible references for the healthy development of China's securities market. Hence this study is of greater significance in terms of its theory and practice.
|
PDF Full Text Request