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Shanghai Stock Exchange, the country's number one bourse, is introducing a tentative rule on warrant business to the domestic stock market. The release of the new rule indicates the returning of the warrant certificates to the Chinese stock market.
The tentative rule is expected to regulate the issuance of warrants, a new financial tool that may shelter investors from stock risks. A warrant gives the holder the right, but not the obligation to buy or sell an underlying security at a certain price, neither the quantity nor future time. The issuer of the warrants can be a listed firm or a third party.
The rule also specifies that the listed firms, who issue warrants, should have at least US$360 million worth of stock value in the 20 trading days. And the changing-hands rate should be above 25 percent in the 60 trading days before issuance.
Warants are widely used on the international market. They are a useful financial tool in offering business giants to invest during the bullish period, as well as providing shelters to investors during a bear market.
(CCTV.com July 18, 2005)
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