Asia Times: China


	June 26, 2002	atimes.com

China

State move sends markets soaring

BEIJING - Stock markets in Shanghai and Shenzhen rocketed sky-high on Monday after hearing the State Council's call for a stop to the sale of state-controlled shares in listed companies.

The Shanghai bourse closed at 1,707.31, surging 144.59 points, or 9.25 percent, while the composite index of the Shenzhen bourse rose sharply by 42.54 points, or 9.05 percent, to close at 512.38 points. The combined volume of the two markets reached 89.8 billion yuan (US$10.85 billion), one of the highest for a single trading day in China's stock market history.

Analysts believe the positive news from the State Council is the driving force behind Monday's market performance. It announced its decision to stop selling state-owned shares in listed companies that day, and the China Securities Regulatory Commission also issued a notice to further regulate new issues by listed companies. The news boosted investors confidence and helped drive outside capital into the market.

State-owned shares have long been a sore point for both investors and the government. In China, some 60 percent of the shares in listed companies are controlled by the state and cannot be traded on the market. With the progress of China's market-oriented economic reforms, it is essential for the state to move out of these companies.

Last June, a trial plan for selling off state-owned shares was implemented. This immediately sent investors into panic and the representative Shanghai Stock Exchange composite index dropped from over 2,100 points to a low of under 1,400 points. The bearish mood remained for more than a year, seriously affecting the markets' capital-raising function.

Wu Xiaoqiu, director of the Financial and Securities Research Institute under the People's University of China, said the latest move by the State Council is the right choice.

Tang Zhenbin of Galaxy Securities said investors have had very hard times since last June and the positive news has helped them get rid of a heavy psychological burden.

China's savings deposits have exceeded 8 trillion yuan, corporate money is also quite substantial and the capital source for the markets is adequate, so a new round of market growth is possible in the second half of this year.

Analysts think that the surge on Monday heralds a turning point for the market, and an improved market environment will ensure the long-term steady development of the market.

They believe that since the beginning of this year, China's securities regulatory departments have stepped up market supervision. The information releases from listed companies are increasingly standardized and their transparency is mostly improved.

Now illegal practices on the market are being severely punished, and some who have maliciously manipulated stock prices are being prosecuted. These actions are added positive factors for investors and the long-term development of the market.

(Asia Pulse/XIC)