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Four listed firms pioneer State share reform

(Agencies)
Updated: 2005-05-09 14:38

Four firms will become China's first to begin selling untraded government-owned stock in a revived programme to unload US$300 billion of State shares that have pressured markets for years.

The pioneering four -- including machinery maker Sany Heavy Industries Co Ltd and computer services provider Tsinghua Tongfang Co Ltd -- said their publicly traded stock would be suspended from Monday.

The other two are packaging materials firm Shanghai Zi Jiang Enterprise Group Co Ltd and coal producer Hebei Jinniu Energy Resources Co Ltd. Their shares would resume trade if their selldown programmes are passed or rejected by shareholders.

Stocks plunged 30 percent the last time regulators tried it in 2001, as investors worried the massive sale of the stock -- comprising some two-thirds of total market capitalisation -- would flood bourses.

"Our company has won approval from the China Securities Regulatory Commission to pioneer state share reforms," Sany said in a statement published in the Shanghai Securities News that was largely similar to the other three's.

Most Chinese companies have listed only a sliver of their total shares,with their State-owned parents and government-linked institutions owning majorities.

The four represent an eclectic mix of industry, from Tongfang -- an arm of the country's third-largest homegrown personal computer maker -- to private firms such as Zi Jiang.

All are mid-sized listed firms with between 52 and 75 percent of their stock being non-tradeable State shares.

China unveiled its latest State share reform ahead of a week-long Labour Day market break ended Sunday, jumpstarting the programme after afour-year hiatus with policies that gave shareholders a say in how and when listed firms unload stock.

It also proposed steps to prevent bourses from crashing. The guidelines allow listed firms to proceed with stock sales only if two-thirds of non-government shareholders agree, and impose limits on the amount of shares in a listed firm that can be sold over one to two years, regulators had said.

State shareholders must agree to list no more than 5 percent of a company's non-tradable shares in a 12-month period, and no more than 10percent in 24 months.

Regulators are especially cautious about re-starting the controversial programme with markets having already shed 8.5 percent this year --extending a 15 percent dive in 2004.

Despite that, Chinese stocks trade at premiums of more than 20 times earnings, far higher than in Hong Kong, as investors with US$1.5 trillion in savings chase scarce investment options.