China to push state firm listings, open markets

Ulhas Joglekar ulhasj at
Sun Jan 30 17:31:45 PST 2000

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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