(SHANGHAI) Chinese securities regulators, seeking to support the stock market, plan to introduce a new system for sales of shares made tradable by the expiry of lock-up periods, the 21st Century Business Herald reported yesterday.
The system is likely to be announced soon after this month’s Beijing Olympics, the newspaper reported.
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China plans new share sale system
(SHANGHAI) Chinese securities regulators, seeking to support the stock market, plan to introduce a new system for sales of shares made tradable by the expiry of lock-up periods, the 21st Century Business Herald reported yesterday.
Institutions would be permitted to issue exchangeable bonds that could eventually be swapped for the shares, the newspaper quoted unidentified officials at the China Securities Regulatory Commission as saying.
The system is likely to be announced soon after this month’s Beijing Olympics, the newspaper reported.
Tens of billions of dollars worth of stocks will become tradable this year and next with the expiry of lock-up periods related to initial public offers and the reform of state shareholding structures.
The threat of a heavy supply of shares if institutions choose to sell those holdings has been a major factor undermining the stock market, where the Shanghai Composite Index is more than 60 per cent below last October’s record peak.
Earlier this month, the commission said it would seek to use instruments such as exchangeable bonds as part of its efforts to reduce pressure on the stock market, but it did not elaborate.
Analysts said the new system could help stocks moderately but it would not be a panacea for the market.
While the system would slow new share supply reaching the market, the supply threat would not disappear, they noted. Clear signs that corporate profit growth is bottoming will probably be needed for any strong rebound of stocks, they said.
‘The new system would address a problem which has been plaguing investors, but reversing the market’s weakness will need more time and more measures,’ said Yang Weicong, analyst at United Securities.
This is another reason why I think SSE will move up after the Olympic Game.
China plans underwriting of newly tradable shares
SHANGHAI, Aug 23 - Chinese authorities, seeking to reduce downward pressure on the stock market, said institutions would be allowed to use brokerages as underwriters when selling shares made tradable by the expiry of lock-up periods.
Tens of billions of dollars worth of Chinese stocks will become newly tradable this year and next with the expiry of lock-up periods related to initial public offers and reform of state shareholding structures.
The threat of this extra supply is a major factor which has pushed the Shanghai Composite Index <.SSEC> to a 20-month low this month, down more than 60 percent since last October.
Under a plan reported by official business newspapers on Saturday, the China Securities Regulatory Commission said institutional investors would be permitted to sell such shares through offers underwritten by brokerages.
A price consultation process conducted by the brokerages would ensure fair pricing of the shares, and the offers would distribute large blocks of shares among a wide range of buyers, reducing the impact on the market, an unnamed commission official was quoted as saying.
The China Securities Journal quoted the official as saying a detailed proposal for the scheme would be announced very soon. The commission does not aim to prevent institutions from selling shares or increase their costs in doing so, he said.
“We have no intention to block sales,” the official was quoted as saying. “That would be retrograde thinking.”
The commission has also said it is considering the use of bonds exchangeable into stocks to ease the impact of newly tradable shares coming onto the market.
In April, the commission began requiring institutions intending to sell more than 1 percent of a listed company over one month to use an off-market trading system.
Since then, there have been only five violations of the rule, which have been penalised with steps such as asking the seller to deposit part of the profit earned by the sale at the listed firm in the form of shareholders’ funds, the official said.
In another effort to support the stock market, the commission said on Saturday it would press listed companies to adopt more transparent and generous dividend policies.
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