Asia Times Online :: China News, China Business News, Taiwan and Hong Kong News and Business.Greater China
Aug 13, 2005
Chinese bourse enjoys sharp gains
BEIJING - Chinese stock markets closed higher August 11 with major stock indices reaching new highs since early June, when major indexes of the Shanghai market dropped below the 1,000 point level. Major blue chips, such as Sinopec, China Unicom and banking shares, continued to rise August 11. Their share prices have gone up by up to 40%, which contributed significantly to the rising indices.
The benchmark Composite Stock Index of the Shanghai Stock Exchange, which covers yuan-denominated A shares and foreign-currency B shares, rose to 1,183.58 points, up 1.59% from the previous trading. The Component Stock Index on the Shenzhen Stock Exchange closedat 3,128.42 points, up 2.14% from Wednesday. Total volumes of shares traded on the markets stood at 28.2 billion yuan (US$3.48 billion), also a record high in the past few months.
Hu Jun, an analyst with Guotai Junan Securities Co, said the pressure on the stock markets is growing rapidly for downward fluctuation as the Shanghai composite index approaches the 1,200 point level. Chinese stock markets, which were created 15 years ago, have fallen continuously since 2001. Poor corporate governance and split share structure problem have been blamed as major problems for the sluggish market performance.
The split share structure refers to the existence of a large volume of non-tradable state-owned and so-called "legal person" shares, which have constituted about two-thirds of the shares of the firms listed on China's two stock markets. Starting in early May, China launched an experiment to tackle this problem so that those state shares will be eligible for floating on the markets after majority stockholders pay compensation, typically around 30% of the shares, to minority stockholders. Some analysts consider the recent rises to be at least partly due to the split-share structure reforms, which were intended to increase confidence in the market's long-term potential.
The Chinese economy has been growing by an annual average of 9.4% for the past 27 years, while the domestic stock markets, far from being an economic barometer, have plunged by half during the past four years.
(Asia Pulse/XIC)
Saturday, August 13, 2005
Thursday, August 11, 2005
Securities Law must be better enforced
Securities Law must be better enforcedSecurities Law must be better enforced
China Daily Updated: 2005-04-27 06:36
The proposed amendment to the Securities Law rekindles a ray of hope for the ailing stock market, which stumbled to six-year low on Monday.
However, how long the flickering hope will last, or whether it will become stronger, will depend on more than an amended law although it was revealed the law will close many loopholes in the country's securities legislation.
The draft amendment to the Securities Law, which took effect in 1999, came under the review of top legislators on Sunday.
The following day, the benchmark Shanghai composite index continued its slump and registered its lowest closing price in six years.
The market's nonchalance towards the legal amendment, which should be, in the words of mainstream analysts and officials, a great stimulus to investor mood, shows deep-rooted distrust in the authorities' efforts to save the market.
It is not because the new amendment fails to represent the interest of investors.
Lawmakers have revealed the draft law amendment proposes to include a wider scope for civil lawsuits. Top managers of listed companies would be required to shoulder more responsibility over the disclosure of information. And an insurance fund for small investors may also be established.
All these points are key to fostering a healthy market.
Take corporate information disclosure as an example. A Shanghai Stock Exchange report said more than 83 per cent of listed companies' misconduct concerned deceptive information disclosure, which misleads investors.
Any good measures, however, take time to take effect. The new amendment, even if passed by legislators, will only rehabilitate the market gradually.
To save the market, its leadership must first come to terms with the real causes behind the low market mood.
It is widely argued that the current downward trend has been caused by disappearing investor hope over a solution to the lingering problem of non-tradable shares. As a transitional move in the reform of State-owned enterprises, listed companies in the A-share market have about 60 per cent of their shares held by the State. These are non-tradable. Last week, it was rumoured that a quick solution will be found to this issue.
The worries, expectations and despair in the wake of the rumour have shaken the market. But that is not all the story.
The recent doldrums have lasted for four years. Last year alone, the Shanghai stock index slid by 15 per cent, making it one of the world's worst performers. Each of the country's 70 million stock accounts, on average, lost more than 2,000 yuan (US$241).
What is worse, there is no sign the depressed market will improve in the near future.
Behind all this are wild market irregularities, which have forced investors to "vote with their feet" and for which the authorities are responsible.
Thanks to its loose approval procedures, the securities authorities have allowed many bad-performing companies in the market so they can benefit from cheap money from investors. It has failed to ferret out problematic companies. Moreover, it has not meted out adequate punishment for those engaged in price rigging, false information disclosure and market manipulation.
Loose regulations are a de facto encouragement for other misdeeds.
To reshape the market, the authorities must play its role of strengthening market regulation. Merely pinning their hopes on an amended law is childish.
(China Daily 04/27/2005 page6)
China Daily Updated: 2005-04-27 06:36
The proposed amendment to the Securities Law rekindles a ray of hope for the ailing stock market, which stumbled to six-year low on Monday.
However, how long the flickering hope will last, or whether it will become stronger, will depend on more than an amended law although it was revealed the law will close many loopholes in the country's securities legislation.
The draft amendment to the Securities Law, which took effect in 1999, came under the review of top legislators on Sunday.
The following day, the benchmark Shanghai composite index continued its slump and registered its lowest closing price in six years.
The market's nonchalance towards the legal amendment, which should be, in the words of mainstream analysts and officials, a great stimulus to investor mood, shows deep-rooted distrust in the authorities' efforts to save the market.
It is not because the new amendment fails to represent the interest of investors.
Lawmakers have revealed the draft law amendment proposes to include a wider scope for civil lawsuits. Top managers of listed companies would be required to shoulder more responsibility over the disclosure of information. And an insurance fund for small investors may also be established.
All these points are key to fostering a healthy market.
Take corporate information disclosure as an example. A Shanghai Stock Exchange report said more than 83 per cent of listed companies' misconduct concerned deceptive information disclosure, which misleads investors.
Any good measures, however, take time to take effect. The new amendment, even if passed by legislators, will only rehabilitate the market gradually.
To save the market, its leadership must first come to terms with the real causes behind the low market mood.
It is widely argued that the current downward trend has been caused by disappearing investor hope over a solution to the lingering problem of non-tradable shares. As a transitional move in the reform of State-owned enterprises, listed companies in the A-share market have about 60 per cent of their shares held by the State. These are non-tradable. Last week, it was rumoured that a quick solution will be found to this issue.
The worries, expectations and despair in the wake of the rumour have shaken the market. But that is not all the story.
The recent doldrums have lasted for four years. Last year alone, the Shanghai stock index slid by 15 per cent, making it one of the world's worst performers. Each of the country's 70 million stock accounts, on average, lost more than 2,000 yuan (US$241).
What is worse, there is no sign the depressed market will improve in the near future.
Behind all this are wild market irregularities, which have forced investors to "vote with their feet" and for which the authorities are responsible.
Thanks to its loose approval procedures, the securities authorities have allowed many bad-performing companies in the market so they can benefit from cheap money from investors. It has failed to ferret out problematic companies. Moreover, it has not meted out adequate punishment for those engaged in price rigging, false information disclosure and market manipulation.
Loose regulations are a de facto encouragement for other misdeeds.
To reshape the market, the authorities must play its role of strengthening market regulation. Merely pinning their hopes on an amended law is childish.
(China Daily 04/27/2005 page6)
Amended law to protect investors
Amended law to protect investors
Amended law to protect investors
Sun Shangwu
2005-04-29 06:36
The amended Securities Law is required for establishing a protection fund for stock investors, said a major official involved in drafting the revised law.
The law is currently under the deliberation of Chinese top legislators.
"This is one of the major measures to protect interests of stock investors, mainly small and medium-sized investors," said Xu Jian, a senior official from the Financial and Economic Committee of the National People's Congress (NPC), in an interview with China Daily.
"Some money for the fund will come from securities companies and others are accumulated in a legal way," added Xu, who is the director of the law drafting team.
He said the scale of such a fund is "not very small" but declined to specify the figures.
Another big step taken by the amended law is to guarantee the safety of stock investors' money.
The amended law stipulates that stock market investors' cash must be deposited in commercial bank accounts of investors, rather than in securities companies.
The current practice allows all cash to be kept by securities companies. Some companies have been found of embezzling the money to make up their business losses.
The number of registered securities accounts in China is about 70 million.
"The new law will not allow securities companies to have any chance of embezzling money," said Xu.
"The amended law is devoted to solving problems in five sectors," said Xu.
They are:
the poor quality of listed companies
irregularities of securities companies
the protection of investors' interests
the improvement of system concerning the issuing
trade and registration of stocks as well as supervision of the stock market.
The draft law amendment has 229 articles, among which 29 are newly added and 95 articles are revised. Fourteen articles from the current law had been deleted.
"Many articles in the amended law will be more practicable in fighting against fraudulent activities in the stock market," said Xu.
For example, the amended law stipulates that companies or people involved in such fraudulent activities as insider trading or market rigging should shoulder compensation responsibilities.
"This is very significant because it allows stock investors to file lawsuits in court and claim compensation," said Xu.
The current Securities Law, which was put into force on July 1, 1999, already contains clauses about investors' rights to sue listed companies, but the clauses are not very practicable because of a lack of specific stipulations for such litigation in the law itself and related laws such as Civil Procedure Law and Corporate Law.
"The revised law will include specific articles on how to ascertain legal responsibilities as well as the punishment," said Xu.
He said the law has left room for the expansion of a market structure in the future, such as allowing trading on credit, which allows investors to borrow money or stocks via stock trading.
Such activities are now categorically banned by the current Securities Law, which was drafted in late 1998, when caution towards risk-taking was extremely high due to the Asian financial crisis.
The introduction of trading on credit is crucial to maintaining vitality of trading, according to Xu. Currently, investors earn money only when the indices rise. The result is that when the stock market declines, trading volume shrinks drastically.
"The merit of trading on credit is that when investors have conflicting views on the market's direction, trading volume still can be vibrant," Xu noted.
Xu said the law will give the China Securities Regulatory Commission (CSRC) more power to supervise the market.
When necessary, CSRC officials are allowed to check the stock accounts and bank accounts of companies and individuals and even take further actions to freeze or close these accounts.
"Such powers are very necessary and it allows CSRC to play bigger role in supervising the market," said Xu.
"Of course, their law-enforcement practice is also under strict supervision so as to avoid the abuse of power," he noted.
Drafting of the amended Securities Law is "good news for Chinese stock market in the long-term perspective."
The law will provide a legal framework for the future development of the stock market. The stock market set six-year closing lows this week.
"The major reason for the current bearish market is the problem concerning the irrational share structure of listed companies," said Xu.
The State Council has promised to adopt policies to resolve the irrational share structure of listed firms, which is a move widely regarded as the basic cure to the ailment in China's stock market.
"Such problem is a policy-related issue, and has nothing to do with legislation," said Xu.
The amended law had been submitted to the NPC Standing Committee for the first review this week.
According to China's legislation procedure, a draft law usually should receive two or three reviews. The new Securities Law is expected to be passed before the end of this year.
(China Daily 04/29/2005 page1
Amended law to protect investors
Sun Shangwu
2005-04-29 06:36
The amended Securities Law is required for establishing a protection fund for stock investors, said a major official involved in drafting the revised law.
The law is currently under the deliberation of Chinese top legislators.
"This is one of the major measures to protect interests of stock investors, mainly small and medium-sized investors," said Xu Jian, a senior official from the Financial and Economic Committee of the National People's Congress (NPC), in an interview with China Daily.
"Some money for the fund will come from securities companies and others are accumulated in a legal way," added Xu, who is the director of the law drafting team.
He said the scale of such a fund is "not very small" but declined to specify the figures.
Another big step taken by the amended law is to guarantee the safety of stock investors' money.
The amended law stipulates that stock market investors' cash must be deposited in commercial bank accounts of investors, rather than in securities companies.
The current practice allows all cash to be kept by securities companies. Some companies have been found of embezzling the money to make up their business losses.
The number of registered securities accounts in China is about 70 million.
"The new law will not allow securities companies to have any chance of embezzling money," said Xu.
"The amended law is devoted to solving problems in five sectors," said Xu.
They are:
the poor quality of listed companies
irregularities of securities companies
the protection of investors' interests
the improvement of system concerning the issuing
trade and registration of stocks as well as supervision of the stock market.
The draft law amendment has 229 articles, among which 29 are newly added and 95 articles are revised. Fourteen articles from the current law had been deleted.
"Many articles in the amended law will be more practicable in fighting against fraudulent activities in the stock market," said Xu.
For example, the amended law stipulates that companies or people involved in such fraudulent activities as insider trading or market rigging should shoulder compensation responsibilities.
"This is very significant because it allows stock investors to file lawsuits in court and claim compensation," said Xu.
The current Securities Law, which was put into force on July 1, 1999, already contains clauses about investors' rights to sue listed companies, but the clauses are not very practicable because of a lack of specific stipulations for such litigation in the law itself and related laws such as Civil Procedure Law and Corporate Law.
"The revised law will include specific articles on how to ascertain legal responsibilities as well as the punishment," said Xu.
He said the law has left room for the expansion of a market structure in the future, such as allowing trading on credit, which allows investors to borrow money or stocks via stock trading.
Such activities are now categorically banned by the current Securities Law, which was drafted in late 1998, when caution towards risk-taking was extremely high due to the Asian financial crisis.
The introduction of trading on credit is crucial to maintaining vitality of trading, according to Xu. Currently, investors earn money only when the indices rise. The result is that when the stock market declines, trading volume shrinks drastically.
"The merit of trading on credit is that when investors have conflicting views on the market's direction, trading volume still can be vibrant," Xu noted.
Xu said the law will give the China Securities Regulatory Commission (CSRC) more power to supervise the market.
When necessary, CSRC officials are allowed to check the stock accounts and bank accounts of companies and individuals and even take further actions to freeze or close these accounts.
"Such powers are very necessary and it allows CSRC to play bigger role in supervising the market," said Xu.
"Of course, their law-enforcement practice is also under strict supervision so as to avoid the abuse of power," he noted.
Drafting of the amended Securities Law is "good news for Chinese stock market in the long-term perspective."
The law will provide a legal framework for the future development of the stock market. The stock market set six-year closing lows this week.
"The major reason for the current bearish market is the problem concerning the irrational share structure of listed companies," said Xu.
The State Council has promised to adopt policies to resolve the irrational share structure of listed firms, which is a move widely regarded as the basic cure to the ailment in China's stock market.
"Such problem is a policy-related issue, and has nothing to do with legislation," said Xu.
The amended law had been submitted to the NPC Standing Committee for the first review this week.
According to China's legislation procedure, a draft law usually should receive two or three reviews. The new Securities Law is expected to be passed before the end of this year.
(China Daily 04/29/2005 page1
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