LexisNexis(TM) Academic - Document

LexisNexis(TM) Academic - Document

Copyright 2005 The Financial Times Limited
Financial Times (London, England)

June 28, 2005 Tuesday
London Edition 1

SECTION: COMPANIES ASIA-PACIFIC; Pg. 32

LENGTH: 404 words

HEADLINE: China to expand scheme to unwind non-tradeable shares

BYLINE: By GEOFF DYER

DATELINE: SHANGHAI

BODY:


China's plan to reform its stock markets is to be widened to include companies listed in Hong Kong as well as on the mainland, the head of the market regulator said yesterday.

Shang Fulin, chairman of the China Securities Regulatory Commission, said a number of companies with dual mainland-Hong Kong listings were preparing to take part in unwinding the large numbers of listed company shares that cannot be traded.

Speaking at a rare press conference, Mr Shang said the government was determined to push ahead with reforms, which are still at a trial stage. But he added that the government would not sell all its shares.

The CSRC plan is designed to address the fact that around two-thirds of the equity in China's listed companies cannot be traded, and most is in state hands. Many analysts believe this is one of the main causes of the dismal performance of China's stock markets in recent years.

"At the moment, holders of non-tradable shares care little about fluctuations in stock prices," Mr Shang said. "It (the planned reform) is not a panacea, but without it we will not go anywhere."

The government has launched a pilot programme under which the non-tradeable shares are listed and then gradually sold in small chunks. Four small companies were in the first group selected for the trial and a list of 42 companies was recently unveiled for the second tranche, including some of China's leading corporations.

Mr Shang said that instead of unveiling a third list of companies, the government would soon announce general rules for all listed companies to begin addressing the issue. "We aim to try and move to a basic solution within a relatively short period," he said, adding that the process would take place "gradually".

With some investors afraid of a glut of new shares coming on to the market, Mr Shang emphasised that the government would retain controlling stakes in many companies that take part in the reform. "Making all the shares tradeable does not mean selling all the shares," he said.

According to UBS, 32 Chinese companies have dual listings in Hong Kong and on mainland stock exchanges. Mr Shang said the government was looking closely at this situation and added that some of those companies were already preparing a plan to unwind their non-tradeable shares.

The Shanghai stock market rose strongly yesterday, with the benchmark composite index closing up 2.1 per cent, ahead of Mr Shang's press conference.

LOAD-DATE: June 27, 2005