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Wednesday, 8 April 2009
Mainland companies dump 6.54b yuan of unlocked shares
Mainland companies dumped a sizeable chunk of formerly non-tradable shares last month, fuelling worries about the strength of the current rally as investors are also expected to embark on a selling spree in the coming months to lock in profits.
Mainland companies dump 6.54b yuan of unlocked shares
Daniel Ren in Shanghai 8 April 2009
Mainland companies dumped a sizeable chunk of formerly non-tradable shares last month, fuelling worries about the strength of the current rally as investors are also expected to embark on a selling spree in the coming months to lock in profits.
A total of 608 million previously locked-up shares worth 6.54 billion yuan (HK$7.41 billion) were sold last month, according to a TX Investment Consulting report, adding that a potential equity influx would weigh down the market. The data was based on public statements of the listed firms, and TX said the real sell-down of the formerly non-tradable stakes should have been even more severe since many companies did not release the information.
“The big stake owners thought the current valuation of the stocks were high following the hefty market gain this year,” said Guotai Junan Securities analyst Zhang Kun.
“As the market continues to climb, the selling pressure will get heavier.”
The Shanghai Composite Index has risen 33.96 per cent so far this year, closing at 2,439.182 points yesterday. The key index plunged 65.39 per cent last year, the biggest drop in its 18-year history.
A total of 687.2 billion shares worth more than 4 trillion yuan held by state-owned companies or major shareholders will become free-floating this year after their lock-up period expires.
Analysts said the recent rally had created an easy exit for owners of the stakes, who were more knowledgeable about corporate fundamentals and economic outlook.
Guotai Junan said in an earlier report that many of the state-owned companies would dump shares when the key indicator rose above the 2,200-point level since the company earnings could not support the prices if the market were to jump further.
This month, 25.4 billion formerly non-tradable shares will be unlocked as their lock-up period expires, according to China Jianyin Investment Securities.
A Shenyin Wanguo report in February estimated that hundreds of billions of yuan borrowed from banks to fund industrial projects had flowed into the stock market as investors bet on an early recovery of the mainland economy.
China started to reform the share structure of listed companies in 2005, requiring the parents of listed companies to offer incentives to holders of tradable shares in exchange for the rights to unlock the non-tradable shares. All the shares will become free-floating in 2010.
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Mainland companies dump 6.54b yuan of unlocked shares
Daniel Ren in Shanghai
8 April 2009
Mainland companies dumped a sizeable chunk of formerly non-tradable shares last month, fuelling worries about the strength of the current rally as investors are also expected to embark on a selling spree in the coming months to lock in profits.
A total of 608 million previously locked-up shares worth 6.54 billion yuan (HK$7.41 billion) were sold last month, according to a TX Investment Consulting report, adding that a potential equity influx would weigh down the market. The data was based on public statements of the listed firms, and TX said the real sell-down of the formerly non-tradable stakes should have been even more severe since many companies did not release the information.
“The big stake owners thought the current valuation of the stocks were high following the hefty market gain this year,” said Guotai Junan Securities analyst Zhang Kun.
“As the market continues to climb, the selling pressure will get heavier.”
The Shanghai Composite Index has risen 33.96 per cent so far this year, closing at 2,439.182 points yesterday. The key index plunged 65.39 per cent last year, the biggest drop in its 18-year history.
A total of 687.2 billion shares worth more than 4 trillion yuan held by state-owned companies or major shareholders will become free-floating this year after their lock-up period expires.
Analysts said the recent rally had created an easy exit for owners of the stakes, who were more knowledgeable about corporate fundamentals and economic outlook.
Guotai Junan said in an earlier report that many of the state-owned companies would dump shares when the key indicator rose above the 2,200-point level since the company earnings could not support the prices if the market were to jump further.
This month, 25.4 billion formerly non-tradable shares will be unlocked as their lock-up period expires, according to China Jianyin Investment Securities.
A Shenyin Wanguo report in February estimated that hundreds of billions of yuan borrowed from banks to fund industrial projects had flowed into the stock market as investors bet on an early recovery of the mainland economy.
China started to reform the share structure of listed companies in 2005, requiring the parents of listed companies to offer incentives to holders of tradable shares in exchange for the rights to unlock the non-tradable shares. All the shares will become free-floating in 2010.
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