The Shanghai Stock Exchange is asking for advice from experts
about reforming China's exchange listing rules.
Draft plans for the listing rules need revision, some insiders
say.
In a statement filed late on Monday, the exchange asked for
opinions from industry insiders about the reform of China's listing
and transaction rules, a sign that the securities regulator plans
to launch the reform probably next month - ahead of the launch of a
Nasdaq-type growth board.
China's listing rules have been in the spotlight after several
companies, PetroChina in particular, suffered from bleak
performances after a stellar debut.
Shares of PetroChina opened at 48.6 yuan (US$6.65) in November
last year and have slid nearly 50 percent since then.
The core of the problems, some insiders say, lies in the initial
public offering system which favors institutional investors over
individuals in share pricing and allotment.
The current system has three ways of subscribing to share
issues: private placement to strategic investors, private special
subscription for institutional investors and open on-line
subscription.
But even in the on-line subscription which distributes IPO
issues by the size of funds, individual investors have little
chance of competing with rich institutional investors.
Thus most individuals can only buy shares after trading begins.
In a bullish market with high sentiment, a large number of retail
buyers pushes the share price to an unreasonable height and watches
it nosedive when institutional investors start to sell.
"The biggest characteristic of the current system goes to its
leaning towards institutional investors. It creates loopholes for
speculation in IPO trading and threatens market stability," said
Wang Cheng, an analyst with Guotai Jun'an Securities Co.
At the end of last year, the China Securities Regulatory
Commission and Shanghai Stock Exchange invited a group of brokers
and insurance companies to discuss the phenomenon of PetroChina's
performance, paving the way for the reform.
So far, there are a few draft plans on the market, including one
which wants to establish a monitoring system on pricing and
adopting a market value or stock accounts-based allotment system
for shares.
But these measures will not protect the interests of smaller
investors, analysts said.
(Shanghai Daily January 23, 2008)
