China has unveiled a three-stage plan to gradually resume
domestic stock sales to bolster its capital market with more
good-quality listings while avoiding a glut of unwanted shares.
Under the arrangement, listed companies will first be permitted
to place equities with existing stock holders pending lock-up
periods or issue stock warrants to investors, the China Securities
Regulatory Commission said in a Website statement late Sunday.
On the second stage, public firms, which finished their
non-tradable share reforms more than half a year ago, can float
additional stocks to public investors on domestic markets, the
statement said.
Given the process goes smoothly, regulators will finally resume
initial public offerings of "good quality" companies "at a proper
time," according to the statement.
Chinese authorities halted all sales of stocks and bonds last
May as the country works to convert US$250 billion in non-tradable
state-owned shares into free-floating entities at all mainland
listed firms.
So far, companies representing about 60 percent of combined
market value in Shanghai and Shenzhen have completed their stock
overhauls.
"As the reform has been proceeding smoothly, it's now time to
consider restarting share sales," the regulator said in the
statement, But "when any issuance will go must depend on market
conditions and we should prevent a stock flood from casting a
psychologically negative impact on investors."
China's stock markets, plunging to eight-year lows last year,
have picked up in the past several months as the stock-market
watchdog prompted more institutional participation, stepped up
oversight of corporate management and paced up development of
derivatives.
Under revised listing guidelines also issued Sunday, regulators
prohibited public companies from selling additional shares at a
discount to market prices, a move previously adopted to woo
investors.
Selling stocks at prices higher than market levels will make it
hard for poorly-performing companies to raise funds and protect
minority stock holders' interest, analysts said.
Regulators also promised to make pricing mechanism more
market-oriented and urged listed firms to boost dividend payouts to
shareholders, according to the guidelines.
Companies, which have gained nod from the regulator to issue
stocks, can decide when to proceed themselves within the following
six months, instead of being assigned an issuance date by the
watchdog, the guideline said.
(Shanghai Daily April 17, 2006)