The injection of assets by the parent companies of their listed
units could whip the Chinese stock market into another bullish run,
says a report from CITIC Securities.
China's stock market, which turned in a stellar performance in
2006, plunged nearly 9 percent on February 27 on rumors that China
might impose a capital gains tax.
The report contends that the slump was similar to what happened
last June, when the market nosedived as government-inspired reforms
came to an end. Since July, it has not been the government's
shareholder structure reforms that have driven the market but
rather IPOs and robust performances by listed companies, the report
says.
An assets injection by parent companies into listed companies
could be a new driving force for the stock market, says Dr. Cheng
Weiqing from CITIC Securities.
Controlling parent companies can expect higher gains from the
market if they decide to inject assets into listed firms.
The body supervising China's state-owned assets is also in favor
of assets injection and the listing of companies is seen as a means
of improving state-owned enterprises.
The state-owned enterprises under supervision are active in
major industrial sectors such as defense, petroleum, and
electricity. The companies listed in these sectors account for only
16 percent of the total number of companies listed, but their
business revenue is closer to 40 percent.
The net assets of state-owned enterprises stand at 5.4 trillion
yuan (US$692 billion) but the net assets of their listed
subsidiaries are less than 1 trillion yuan.
Many of the assets of non-listed controlling parent companies
could be used as the source of an assets injection, the report
claims.
(Xinhua News Agency March 5, 2007)