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Commission hints at halt to State share sale
( 2002-01-29 10:39 ) (1 )

The chairman of the China Securities Regulatory Commission on Thursday suggested that the proposed sell-off of State-held shares could be suspended in the interests of investors.

The China Securities Journal said on Thursday Zhou Xiaochuan stressed the importance of market stability and the bolstering of investors' confidence.

The stock index achieved a strong rebound on Thursday, closing up 6.82 per cent at 1,491 points in Shanghai and at 2,982 points in Shenzhen, up 7.31 per cent over the previous trading day. The trading volume was 28.48 billion yuan (US$3.4 billion), the highest since the sale of State-held shares was suspended last October.

Experts said they believed that there have been signs in recent days that the sale of State-held shares will probably be postponed to allow time to bolster the tumbling stock market. Wang Yuanhong, a senior researcher with the State Information Centre, told China Daily: "The central government and the regulatory authorities are considering taking measures to stabilize the stock market and thus curb the downturn of the stock market."

In a commission symposium held in Beijing on Wednesday, Zhou noted that the watchdog's prime concern was protecting the interests of investors. "We will proceed with any reform only under the preconditions of ensuring the stability of the stock market and the protection of investors' interests," Zhou said.

"Reform" refers largely to the controversial plan to sell State-held shares in listed companies. The plan has provoked heated arguments among investors, experts and authorities.

Many experts pointed out in the symposium that the sell-off of State-held shares could only be implemented in a stable market environment. They said the sell-off was a long-term plan and should take into account the opinions of people from all walks of life and gain the support of most shareholders.

Markets soar following regulators' promise

China's stocks logged their biggest single day gains in 14 weeks on Thursday, with hard currency B shares soaring to nearly the 10 per cent daily limit after the top stocks regulator promised to keep the markets stable.

Investors also took heart from major Chinese Web sites quoting a Hong Kong newspaper as saying China might not work out a new scheme to sell down huge State holdings in listed firms before a scheduled government reshuffle.

The Shanghai Composite Index jumped 95.06 points to 1491.665 while the Shenzhen's gained 263.31 points to 2982.70 on Thursday.

The Shenzhen B share index vaulted 9.85 per cent to 209.96 points and Shanghai's ended up 9.84 per cent at 142.714 points as turnover quadrupled. B shares are open to foreigners and Chinese retail investors.

"We will only push ahead any reform under the precondition of assuring market stability and protecting investors' interest," major securities newspapers quoted Zhou Xiaochuan, chairman of the China Securities Regulatory Commission, as saying.

Zhou's remarks and media reports on the State stakes selldown helped restore some market confidence ravaged by liquidity fears, brokers said.

By Thursday's close, the composite index had fallen more than 15 per cent this year on fears any new scheme to sell down government holdings in listed companies, accounting for about two thirds of the US$500 billion markets, would squeeze liquidity.

"Zhou's comments and the Hong Kong media report gave investors a release from worries about the State share sell down," said an analyst with United Securities.

According to major Chinese Web sites, Premier Zhu Rongji said recently it was not imperative to solve the issue of selling down State-owned shares before he stepped down, which is very likely to be next year.

A spokesman for the State Council, China's cabinet, declined to comment. CSRC officials were not immediately available for comment.

Brokers said investors flocked into the markets on Thursday in hopes a delay in the sell-off of billions of State-owned shares would alleviate a short-term liquidity squeeze.

"Buying was so strong today as most investors expect the rally to last into next week because the selldown plan seems unlikely to be implemented any time soon," said an analyst from the Tequ Securities.

"But actually it is hard to say, especially what might happen after the New Year," she said of a two-week market holiday for the Lunar New Year starting on February 11.

Some brokers said the index upside might be limited next week as investors were likely to cash out of the markets ahead of the holiday.

The buying spree even helped lift shares of companies that issued earnings warnings.

Shanghai Chlor Alkali Chemical Co ended up 8.98 per cent at 64.3 US cents and Tianjin Automotive Xiali Co finished up 5.86 per cent at 5.06 yuan (64.9 US cents).

Both companies said they expected profits to have dropped more than 50 per cent in 2001.

Chinese cable network CITIC Guoan Information Industry Co said on Thursday it plans to buy a property developer for a preliminary 95.45 million yuan (US$11.53 million) to diversify into the booming real estate sector.

CITIC Guoan Information, owned indirectly by Hong Kong-listed CITIC Pacific, planned to buy the Datong Real Estate Development Co from an affiliated firm, the company said in a statement published in the China Securities Journal.

Datong had a registered capital of 90 million yuan (US$10.9 million) and assets of 308.20 million yuan (US$37.3 million) in 2001, the statement said.

"The plan is designed to explore new business territories by capitalizing on the growing property markets and underpin the stable development of the company," it said.