New index planned on SSE
By Chen Hua (China Daily)
Updated: 2005-08-17 08:39

The Shanghai Stock Exchange (SSE) will launch a board and a composite index for listed companies which complete floating of non-tradable shares, bourse chairman Geng Liang said in Beijing over the weekend.

The China Securities Regulatory Commission selected six domestically-listed firms in May and 46 in June for a pilot project to float non-tradable shares.

Two-thirds of China's A shares are held by State or legal bodies and are not tradable, which is blamed by experts as one of the main reasons for the four years of stock-market doldrums.

"This is a good idea," said Dong Chen, a senior analyst at China Securities. The new board would be more attractive to investors because all the firms on the board have a transparent share structure and fewer uncertainties, he said.

But Xu Gang, manager of the research department of CITIC Securities, does not believe the new index would have a great influence on the market in the short term.

If it comprises only 50 firms, the group is too small to be a barometer of the 1,400 listed firms on the market. Only if many more firms merge their tradable and non-tradable shares can the index be truly representative, he said.

The CSRC said a few days ago that it would announce guidelines for share mergers of all firms after the pilot project is completed.

Meanwhile, a senior CSRC official was cited by mainland media as saying that as long as listed firms whose shares account for at least 60 per cent of the total market value complete the reform, fund-raising activities can be relaunched.

Since the reform kicked off early in May, all initial public offerings or additional share issues were suspended.

The official was quoted as saying that it would be impossible to wait until all the 1,400 listed firms complete the reform before new fund-raisings it would take three to five years to do so.

Yesterday, the Shanghai Composite Index closed at 1177.28 points, down about 0.8 per cent.

Earlier this month, the benchmark index broke through 1,100 points after hovering slightly above the psychologically-important 1,000 points. Market observers said the market pickup was mainly due to the yuan revaluation and the government's polices to revive the market.

Fund managers and qualified foreign institutional investors are reported to be keen on A-share blue chips, especially the shares of pilot firms floating non-tradable shares.

When floating non-tradable shares, the shareholders have to come out with proposals to compensate owners of tradable shares because tradable shares are subject to market fluctuation and their price is much higher than non-tradable ones.

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