May 11, 2005
Asia Times Online
BEIJING - China's stocks closed at a new six-year low after the week-long holiday ended on May 9.
The Shanghai composite index dropped 2.44% to finish at 1,130.83, its lowest close since the 1,109.09 close on May 19, 1999. The Shenzhen sub-composite index also shed 3.97% to reach 3,031.5 yesterday. And the newly introduced Shanghai & Shenzhen 300 Index, which tracks shares in both Shanghai and Shenzhen, lost 2.49% to end yesterday at 909.17. Combined transactions in the two bourses were about 8.4 billion yuan (US$1 billion), slightly down from the previous session.
Four A-share companies yesterday announced their intention to kick off the experiment of circulating nontradable shares and offering relevant payment to minority shareholders, with more detailed proposals expected in the coming sessions. Trading in the stock of all four companies was suspended May 5.
Analysts said opinion was split on the newly launched pilot reform program of selling untraded State and legal person shares in the listed firms. The China Securities Regulatory Commission (CSRC) released guideline regulations for the program on April 29, just before a nine-day-long break for the bourses for the May Day holiday. Some investors worried that they may not get sufficient compensation from the state share selloff and some were still unprepared for the news, said an analyst with Haitong Securities. But other investors bought actively on stocks that market rumors said might become the next pilot firms to try the nontradable share sell-off scheme.
The short-term impact of the news of the nontradable share flotation could be limited, because regulators will not allow all nontradable shares to flood the market in one go, said Dong Chen, an analyst with China Securities. But in the long run, the flotation of these shares may push down average price/earnings ratios and further polarize share prices.
(Asia Pulse/XIC)
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