A newly announced plan to sell state shares in listed firms has
triggered a new selling spree in China's already plummeting stock
market.
Both experts and investors said they were disappointed with such a
plan, which was published by the market watchdog China
Securities Regulatory Commission (CSRC) last weekend.
Although CSRC claimed that the plan is not final, it battered
investor confidence by introducing ideas such as pricing the state
shares through public bidding and floating all the shares in newly
listed firms.
"The plan's fatal problem is that it is based on the premise that
the market is operating stably," said Wang Yuanhong, a State
Information Center researcher. "But we don't have such a stable
market now."
China's stock market has been sliding since last June, and the
market dove further this month with both the Shanghai and Shenzhen
benchmark indices hitting lows not seen in two years. Some market
analysts even said the market was "on the verge of collapsing."
"Whenever news on state shares reduction is announced, it is
presented as bad news for the market," said Dong Chen, a China
Securities Co analyst. "No matter how the reduction is carried out,
it means big market expansion. But we don't have enough funds to
come in to support the expansion. The plan fails to find a way to
introduce new capital."
The plan also confirms the biggest market worry: that all the
shares of newly listed companies will be tradable, which will
result in relatively low prices for new issues and drag down prices
of old issues.
Moreover, Dong said, the plan is not detailed enough.
Although CSRC promised to compensate former shareholders, the plan
does not specify how much to give or how to do it.
Still, the plan does send some encouraging signals.
For example, downloading will be conducted gradually. And only five
firms listed 12 years ago will be involved in an experiment this
year. The five firms have 822 million shares held by the
government.
The plan also encourages reinvestment of funds pooled from selling
state shares into the stock market and establishment of specialized
funds to buy state shares.
Experts said they hope that the sharp decline in the domestic stock
market will force the relevant authorities to revise the plan.
"It is almost impossible to find a solution to satisfy both the
government and investors," Wang said. "We should work to stabilize
the market."
All in all, the plan is meeting strong opposition from
investors.
"I'm depressed," one investor said. "I hope the final decision can
be made soon so that we know where the bottom of the market
is."
(China
Daily January 29, 2002)