Prediction: Experiments Forthcoming to Make State-owned Shares Liquid
March 21st, 2005Elaine Chan writes in the South China Morning Post that, “China may approve the first batch of three to five listed companies to float non-tradeable state shares as early as May[.]“
The article is available here.
The source of this speculation is the head of a PRC consulting company who has talked with CSRC leaders.
The articles quotes the skeptical reaction of PRC a analyst who observes, I think correctly, that actions which will push down prices in the already-depressed markets are unlikely.
I would further note that making state shares liquid has been under discussion about as long as they’ve been talking about making the RMB freely convertible, allowing more private and foreign-invested companies to list and reducing government approvals. Modest refoms have been made on all those fronts, but the main story is resilience of the status quo. I don’t know why we should expect any meaningful change by May. Even modest experiments might alarm investors (as the CSRC’s earlier efforts to require that 10% of secondary issuances be comprised of state-shares sold to fund the national social security fund).
Personally I imagine the more likely kind of experiments will continue to be approvals for off-exchange transfers of blocks of state-owned shares, not the listing of those shares on public markets.
The article notes Wen Jiabao has been publicly commenting on the importance of helping out the stock market.
Chinese commentators have dubbed Wen’s recent comments on the stock markets “Wen’s 6 Articles” (here, for example). This is a cute reference to the State Council’s 9 Articles, a set of broad policy pronouncements on China’s stock markets adopted in 2004.
The markets rose a little after Wen’s cheerleading, but it hasn’t been sustained.