Toronto Stock Exchange explores potential of China

BEIJING -- Toronto Stock Exchange (TSX), a global leader for mining and energy financing, is keen to explore booming Chinese markets, its senior vice-president Ungad Chadda said Tuesday.

Chadda was leading a team from TSX, part of the TMX Group, at the 14th China Mining Congress & Expo, which is being held in Tianjin from November 3 to 6.

TSX held an awareness session at the conference, hosting more than 200 people at the panel. The exchange has been trying to tap into opportunities that China provides to stock exchanges like his company, Chadda said.

The Canadian stock exchange set up a representative office in Beijing in November 2011, and is currently hosting approximately 50 listed Chinese companies, including those listed on its junior TSX Venture Exchange, which is mainly for small- and medium-cap companies.

"We heard that the lineups for listings on the Shanghai Stock Exchange and other markets was in the years, so we thought that might give us some advantage," said Chadda.

A permanent foothold in China also helps the company better understand the world's second largest economy, Chadda said, "We want to make sure that we understand any new developments within the Chinese domestic market with respect to things like the international board, any new rules and regulations.

"Also, we want to make sure that Chinese companies are fully familiarized about what TSX can offer. We are committed to a long-term strategy here."

Talking about China's economic outlook, Chadda said he was confident.

"What you read in the media is all about China slowing down. However, during our drive from Tianjin to here (Beijing) yesterday, we were counting the number of construction cranes, which was more than 100. It's hard for some of us in the West to understand slowing down with so much expansion," Chadda said.

TSX celebrates its 160th anniversary this year, and is now home to almost 1,600 issuers with total market capitalization of C$2.1 trillion, with an emphasis in gas, oil and mining.

The exchange hopes to leverage its expertise in this area to meet China's increasing demand for energy.

"We are the No 1 destination in the world for oil, mining and gas financing. From a third to 50 percent of the world's annual equity capital raised for mining is done on our market," Chadda said.

And there is more potential.

"When you look at the complexion of Chinese companies by sector, it is actually quite broad from technology to fertilizer to even retail companies, considering that we are known for mining, oil and gas," Chadda said. "TSX provides more opportunities than what we typically market ourselves as resource only."

When asked about Sino-Forest, the Toronto-listed commercial forest plantation operator that has been accused of a Ponzi scheme and saw its shares delisted in May, Chadda remains cautious to maintain the stock exchange's independence.

"There hasn't been anything conclusive by the court or by the regulators. What we do know for a fact is there has been massive losses of shareholder value, that's very sad.

"It has reminded everybody in the market, to gatekeepers collectively, that you have to remain very vigilant and do very good work around internal control, due diligence and disclosure."

The Canadian exchange was about to merge with the Toronto Stock Exchange, until the deal was called off at the last minute.

Looking back, Chadda said it was the shareholders' decision rather than regulatory reasons.

"There has been a lot of confusion in the media as to why that deal didn't work and a lot of people thought it got shot down because of regulatory reasons. That's not the case. The deal was subject to a shareholder approval and we didn't get the approval that we thought we would.

"The fact is we had another party coming to the table with an offer that was viewed by the shareholders to be superior."

Speaking on relations between Canada and China, Chadda said, "I think it's critical, it's good business, whether you are running an exchange or a country, to have strong relations with China. It's role in the world will be very big."