The widely-anticipated seminar held last week by top regulators and securities brokerages failed to deliver the fresh stimuli packages the bearish market had hoped for.

But it did offer some evidence that regulators were, finally, starting to plan long-term -- an approach that may help restore confidence in a market frustrated by what some claim is "impulsive'' policy making.

Analysts noted news that the China Securities Regulatory Commission (CSRC) is, for the first time, drafting a white paper to outline medium and long-term development goals for China's capital market was the most encouraging message from the two-day high-profile seminar that concluded on Wednesday.

"It's not money that is lacking,'' said Wang Yuanhong, a senior analyst with the State Information Centre. "It's confidence primarily.''

"We just cannot cross the river by jumping from stone to stone any longer,'' he added.

China's capital market, established some 12 years ago, has placed little importance on long-term planning. It is still used largely to raise funds, leading to problems like structural imbalances and irrationally high price-to-earnings ratios.

After a hiatus during the SARS (severe acute respiratory syndrome) outbreak, new stock offerings have picked up speed in the past two months amid already sluggish sentiment, weighing indices down further despite the long-awaited arrival of fresh foreign capital through the qualified foreign institutional investor scheme.

Total market capitalization of tradable stocks has shrunk by 28 per cent to 1.3 trillion yuan (US$157 billion) since June 2001.

But there are some positive signs for the market.

Analysts said only one public offering is scheduled this week, while a typical week during the past two months saw two new offerings open to subscribers and another two issues starting trading.

"Convening a meeting at this point and promptly restoring confidence in the market... gives a great deal of support to the transparency and smooth functioning of the securities market,'' said Dong Chen, an analyst with China Securities.

At the seminar, CSRC Chairman Shang Fulin confirmed earlier reports that brokerages will soon be allowed to issue bonds. The announcement gives some comfort to China's 130 struggling stock brokerages.

Chinese securities brokerages are running on empty as a persistently bearish market continues to squeeze income from underwriting business and trading commissions and force sales of their securities holdings.

Discounting by brokerages is making things worse. Although the combined turnover of the Shanghai and Shenzhen bourses rebounded substantially to 16 billion yuan (US$1.9 billion) in the first half of this year, their income dropped by 10.2 per cent on a year-on-year basis, official statistics indicate.

The decision to grant brokerages the long-anticipated right to issue debt should provide some relief.

The change allows brokerages to raise funds by issuing bonds to underwriters, who can sell them to investors on the secondary market.

"It opens a channel for raising long-term funds,'' said Kang Jing, senior analyst with Beijing Securities. "It gives us the function of producing blood rather than merely supplying it (to the stock market).''

According to earlier reports, securities firms will be able to raise debt either through public issues or privately. Eligible public issuance applicants must have a comprehensive licence (which includes brokerage, underwriting and proprietary trading), be profitable for the previous fiscal year and have a minimum of 1 billion yuan (US$120 million) in net assets.

Private placements, which generally occur outside the exchange and target institutional investors, look much easier, requiring a net asset threshold of only 500 million yuan (US$60 million) and no profitability history.

Although a handful of brokerages meet the requirements, analysts are sceptical of the prospects of success in such debt issues, given the dubious reputations and poor profitability of the issuers.

In terms of private placements, one asset manager surnamed Ma at a major Chinese bank said: "Who can guarantee the redemption?''

But the long-term prospects for raising funds still look rosy, with senior government officials stressing repeatedly this year the importance of the capital market in reducing the economy's reliance on the banking industry.

CSRC's Shang Fulin said at the seminar his commission was considering other ways to help securities firms raise funds. Securities firms generally obtain short-term funding from interbank loans and bond repurchases in the money market. But problems in reaching agreement on collateral are making interbank loans difficult, analysts said.

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