China to push state firm listings, open markets

[Ulhas Joglekar]

28 January 2000
China to push state firm listings, open markets
BEIJING: China will focus on listing state-owned firms in 2000 while opening
the stock markets further to insurance companies, top securities official
Zhou Zhengqing said.
Zhou also said China would set up separate high-technology indexes in its
two stock markets in Shanghai and Shenzhen, and would offer preferential
listing terms for high-technology companies.
"The focus will be supporting state-owned enterprises to expand direct
fund-raising," the China Securities daily quoted Zhou as telling a national
meeting of securities officials.
Zhou, chairman of the China Securities Regulatory Commission, said China
would seek and improve methods to allow insurance funds to enter the
securities market.
Insurance firms were given access to the domestic currency stock markets
last year through investment in mutual funds.
Last month, China opened the Shanghai Technology Stock Exchange, which
allows high-technology companies to sell equity and ownership rights to
institutions. The technology exchange is not a public market and has no
relationship with the Shanghai bourse.
Last month, China's parliament approved amendments to the Company Law that
gives preferential treatment to the listing of high-technology firms. That
law had required companies to show three years of profits and the ability to
pay dividends to shareholders before applying for listing.
The Shanghai Securities News said on Thursday the State Council, China's
cabinet, had allowed relevant authorities to draft separate rules on the
listing of high-technology firms. Zhou said high-technology firms now
accounted for 17 percent of China's around 950 listed firms. He also said
China would experiment this year with reforms to the initial public offering
(IPO) process to enable smooth listings of state firms.
Under the plan, investors subscribing to IPOs should have stock positions in
the secondary market, Zhou said without giving details. China's stock
markets last year were under heavy pressure from the rapid listing of state
firms as investors poured funds into the primary market to exploit gaps
between the price/earnings ratio of IPOs and the average level of the
secondary market.
Falling share prices on the secondary market, however, had dragged down IPO
prices by debt-laden state sector firms, whose main problems Premier Zhu
Rongji has vowed to resolve by the end of this year.
Brokers say the IPO policy would encourage investors to buy shares on the
secondary market and that would allow high pricing of state firm IPOs.
Expectations of IPO reform have partly led advances in share prices in
Shenzhen and Shanghai this month and high-tech stocks have outperformed the
markets on rumours of the new high-tech indices, brokers have said.
Zhou said the state would encourage mergers and acquisitions by listed
companies. "Restructured companies meeting requirements will be allowed to
issue new shares," he said.
China would also move to enforce the Company Law provision requiring the
delisting of companies reporting losses for three consecutive years and
"nurture" a batch of strong
securities brokerages, he said.
Chinese companies raised 124.3 billion yuan ($15.02 billion) from domestic
and overseas markets last year, up 30 percent from a year earlier, Zhou
said. The domestic market capitalisation was 2.6471 trillion yuan at the end
of 1999, up 36 percent over the previous year, and investors had opened
44.71 million stock accounts in Shenzhen and Shanghai, he said. (Reuters)
For reprint rights: Times Syndication Service
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