LexisNexis(TM) Academic - Document

LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)

June 20, 2005 Monday
London Edition 1

SECTION: ASIA-PACIFIC; Pg. 5

LENGTH: 442 words

HEADLINE: Big names join China stock market reform NON-TRADEABLE SHARES:

BYLINE: By GEOFF DYER

DATELINE: SHANGHAI

BODY:


China's stock market regulator said yesterday that 42 companies, including some of the country's biggest and best known corporate names, would take part in the second stage of its planned reform of the shareholder structure of listed companies that is seen as crucial to the future of the stock market.

Baosteel, China's biggest steel company, and oil company Sinochem International are among the companies that will begin unwinding their large holdings of non-tradeable shares and in some cases will float the shares on the stock market.

The announcement by the China Securities Regulatory Commission (CSRC) underlines the government's determination to push ahead with the reform plan despite a critical response from investors since it was first unveiled in early May.

The government also said at the weekend it would set limits on the sale of these non-tradeable shares, a statement aimed at easing concerns the market will suffer a flood of new issues.

The reform plan is designed to deal with the fact that around two-thirds of the equity in China's listed companies is in the form of non-tradeable shares, most of which are in the hands of the state. The result is that the majority shareholder often has little interest in the performance of the share price.

Many analysts believe this overhang of unlisted shares is one of the main reasons for the decline in share prices in recent years. The Shanghai market fell 15 per cent last year and is well down again this year.

In early May, the CSRC announced the first four companies in a pilot programme to list their non-tradeable shares and begin selling small tranches.

Of the four, all relatively small, the shareholders in one have rejected the company's offer of compensation in return for having their stakes diluted.

The 42 companies in the second round of the programme include large state-owned groups such as Yangtze Power and Shanghai Port and Container, as well as some private-sector companies such as Suning Appliance Chains, the home appliance retailer.

In recent weeks the government also unveiled measures to boost the stock market, which some analysts believe has been a reaction to the tepid investor response to its reform plan for unlisted shares.

The central bank has said it will extend loans to two brokerage firms to help them through financial difficulties and is holding talks with others.

The State-owned Assets Supervision and Administration Commission, which controls the state's equity holdings, said at the weekend it would engage in the shareholder reform plan, but added that the state would maintain controlling positions in many state-owned enterprises. www.ft.com/globaleconomy

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