The Shanghai and Shenzhen stock exchanges issued new trading
rules yesterday, a move that has helped to drive the country's
stock market to a two-year high.
The new rules, effective from July 1, are the result of a
revision according to the Securities Law and are another important
move in the market's overall development, industry experts say.
"The improved trading rules will promote market activity and
boost capital liquidity," said Li Yongsen, an economist at Renmin
University.
Under the new rules, the two stock exchanges said they will
allow the trading of stocks, funds, bonds, bond repurchases,
warrants and other types of securities permitted by the industry
regulator.
Details like trading hours, transactions and information
disclosure are all outlined in the new rules.
"The rules also pave the way for possible future reform," Li
said.
The new rules stipulate that investments in securities must be
held until the next trading day, except for those that are allowed
to be bought and sold on the same day like bonds and warrants.
This signals that the government might open such trading to
stock investors.
"This policy anticipation, as well as other possible
innovations, stimulates market trade," said Chen Weiqing, an
analyst from CITIC Securities.
According to Chen, these new reforms are likely to come out
together with the resumption of initial public offerings (IPO) in
the near future.
China suspended fund-raising last year as it sought to make
US$230 billion of non-tradable state-owned shares tradable.
On May 8, the China Securities Regulatory Commission (CSRC)
allowed listed firms to issue additional shares and promised to
give quality companies priority to float shares.
The new rules also state that the two stock exchanges can change
the daily 10 percent limit for listed companies after getting
approval from the CSRC.
"The stock market gained due to the issuing of the new stock
trading rules, as well as a stronger yuan yesterday," Chen
said.
The yuan broke through the 8.0000 mark to the US dollar
yesterday for the first time since China revalued the currency by
2.1 percent last July. At one point yesterday, the yuan was trading
at 7.9972 to the greenback.
The benchmark Shanghai composite index rose 3.82 percent to
1,664.088 points, the highest closing level since June 2004. The
Shenzhen composite index, which tracks the smaller market, gained
4.4 percent to finish at 406.97.
Analysts expect the market to stay strong in the near future as
more capital flows in from both individual and institutional
investors.
The benchmark index has jumped by over 40 percent since the
beginning of the year, driven by the government's market-friendly
moves. It has quickened its gains in recent days, advancing 11
percent last week.
On Monday, the China Securities Regulatory Commission announced
its decision to approve the program by the Yangtze Hydroelectric
Power Co. to issue warrants, the first financing project by a
listed firm to be given the green light in a year.
The announcement by the regulator indicates China has begun to
resume financing by listed firms after a one-year suspension, which
was intended to prevent the outflow of capital from the bearish
stock market.
The hydroelectric company submitted its application to raise 6.4
billion yuan (about US$800 million) by issuing warrants a year
ago.
(China Daily, Xinhua May 16, 2006)