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Steelmaker first to list warrants since 1995

(Shenzhen Daily/Agencies)
Updated: 2005-08-19 14:34

Baoshan Iron and Steel Co. Ltd., the listed arm of China's top steelmaker, would list warrants on the Shanghai Stock Exchange on Aug. 22, it said Thursday, marking the first financial derivatives will be traded on the country's bourses since 1995.

The one-year warrants, issued under its State share reform program implemented this week, would allow investors to buy shares at 4.5 yuan (US$0.556) each, compared with the company's current share price of 5.14 yuan.

Baoshan Iron and Steel, which is also known as Baosteel, was among more than 40 firms picked in June to lead the Central Government's efforts to float over US$200 billion of nontradable State shareholdings in listed firms.

"Warrant prices could jump or dive, making holders face high investment risks," Baosteel said in a statement published on the Shanghai Securities News.

"Our company's warrants could be worth nothing on maturity, so investors must be careful."

Mainland investors are unfamiliar with warrants as an investment tool, since it has been ten years since China's stock exchanges offered derivatives.

The government lifted the ban in July to add depth to its capital market and to facilitate efforts to make State shares tradable on bourses.

The effort to sell nontraded State shares was revived in April, after the failure of a first attempt in 2001, to finance a patchy welfare system and enhance transparency.

Under the program, State-owned parents of pioneering companies must compensate public shareholders. Baosteel, for instance, also offered public stockholders 2.2 shares for every 10 held as compensation in addition to one-for-10 warrants.

A legacy of a centrally planned economy, State shares comprise two-thirds of market capitalisation and had weighed on bourses for years.