Shares sold off for new rules

China Science and Merchants capital move to boost private equity business amid regulation changes

Leading Chinese private equity firm China Science and Merchants Capital Management says it is selling shares in eight A-share listed companies this year to meet regulatory requirements and expand private equity business.

According to a statement from the CSM Group, the firm will decrease its shares in Changzhou Tiansheng New Materials Co Ltd. It decreased shares in seven other A-share listed companies in January, including Dalian Sunasia Tourism Holding Co Ltd, Beijing Soft Rock Investment Group Corp and Shahe Industrial Co Ltd.

"The move by CSM Group is to meet the requirements of China's securities regulator and China's new third board, the National Equities Exchange and Quotations," says Zhang Bo, a managing director of Northeast Securities Co Ltd.

Liu Jianjun, deputy director of the department of private fund supervision at the China Securities Regulatory Commission, said late last year that private equity firms were not encouraged to participate in securities investments.

The NEEQ also released a statement last year for the private equity firms listed on the NEEQ, saying at least 80 percent of their revenue needed to be in the form of fees for managing their clients' assets.

Analysts say this means that CSM Group needs to increase its private equity and venture capital business.

Northeast Securities' Zhang adds that China Science and Merchants Capital Management Ltd still regards listed companies as important platforms to develop businesses, and that is why CSM Group still holds shares in A-share listed companies.

China Science and Merchants Capital Management Ltd spent at least 4 billion yuan ($583.1 million; 545.1 million euros; 468.5 million) to buy shareholdings of no less than 5 percent in each of 16 listed companies in 2015.

CSM Group held 21 percent in Netac Technology Co Ltd, according to the third quarter financial report of the listed company in 2016.

Peng Wei, secretary of the board of China Science and Merchants Capital Management Ltd, tells China Daily that the CSM Group will decrease shares of listed companies based on market conditions.

"We will decrease our allocation in the secondary market and focus on supporting industry transformation and upgrading, as well as innovation and entrepreneurship companies," says Peng.

The private equity firm and China Minsheng Investment Group announced in August last year that they would launch a 7 billion yuan mezzanine fund.

caixiao@chinadaily.com.cn

(China Daily Africa Weekly 02/10/2017 page26)