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Four firms to pilot stock market
reform
BEIJING - Four
Chinese listed companies - Shanghai-listed Sany
Heavy Industry, Tsinghua Tongfang, Zijiang
Enterprises, and Shenzhen-listed Jinjiu Energy
have been chosen as the first pilot group of
companies to reform the chronic problem of split
share structure in listed companies, widely
regarded as the most important single cause of the
four-year bear market at the Shanghai and Shenzhen
stock exchanges, which have shed nearly 50% of
their value in that period.
The China
Securities Regulatory Commission (CSRC) also
issued on May 8 an operational guide for the pilot
reform, which is to make the non-negotiable shares
in listed companies held by the state and "legal
persons" negotiable. The top securities regulator
announced on April 29 its decision to experiment
with methods to tackle the problem. "Split share
structure" refers to the existence of a large
volume of shares owned by the state and/or "legal
persons". This has meant that only about one-third
of the shares in domestically listed firms
actually float on the stock markets, which has put
common investors in a weak position compared to
management in making corporate policies and
disposing of the firms' profits and assets.
According to a 10-point document made
public by the China Securities Regulatory
Commission, the country's securities sector was
informed of its decision to determine the
candidates of listed companies for the experiments
in a bid to maintain market stability and protect
the legitimate interests of investors, especially
minority shareholders. The listed companies, which
will be selected according to the decision by
their shareholders and related securities firms,
shall determine, on their own, the solutions to
the troubled split share system. According to the
document, the chosen firms must carry out their
responsibility of information disclosure and make
sure the information is true, accurate and
complete.
Analysts say the experiments
indicate that the the much-talked about reform
will go ahead, and are expected to provide the
country's stock market indices with a strong boost
in the long run.
However, after the
week-long Golden Week holiday break, the Shanghai
and Shenzhen stock markets plunged in the May 9
morning session to new six-year lows, amid fears
of an oversupply of shares when the non-negotiable
shares held by the state and "legal persons" are
put on sale on the secondary market. Not
unexpectedly, the pilot reform has meant market
pressures in the short term. But in the long run,
it also presents opportunities.
Chinese
stock markets have slumped to six-year lows in the
past few days due to the poor corporate governance
structure of many listed firms, the split share
structure problem, and a lack of respect and
protection of the legitimate rights of investors
by both the listed firms and government regulatory
bodies.
China's top legislature revamped
the country's securities law in late April in a
bid to lay a sound and solid legal foundation for
the securities sector, which took shape in the
early 1990s.
(Asia
Pulse/XIC) |
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