These moves had sharp but short-lived impacts on the market as investors continued to be troubled by escalating oil prices, a depreciating US dollar and the specter of a global economic slump. Investor confidence has also been low as a result of the government's credit tightening policy to fight inflation.
The sluggish stock market plus the continuous credit tightening have forced companies to search for new ways, such as issuing corporate bonds, to find funds to fuel growth. However, bond trading with inadequate liquidity as well as the insufficient development of the rating system has impeded companies funding from this market.
Funding woes
With a number of big-caps dropping below their IPO (initial public offering) prices, many companies are concerned about the waning function of the capital market as a source of funding. Starting from China Pacific Insurance Co in late March, several big-caps including PetroChina, China Coal Energy, China Shipping Container Lines Co, China Railway Construction Co, China Construction Bank and other blue chips plunged below their IPO prices in the first six months of 2008.
What's more, share prices of some listed companies have fallen from 30 to as much as 200 percent shortly after making new issues. Latest figuresshow there are 114 companies whose current share prices have dropped below the issue price of their new shares.
"Sharp price drops always followed new share issues, which has almost become the rule over the past year," says Mao Nan, an analyst at Orient Securities in Shanghai.
Some stock analysts say the government should take further measures to rescue the market and restore its basic function, especially when the average P/E ratio (price-earnings ratio) has dropped to a level considered unattractive for corporations to sell new shares. The average P/E of A shares listed on the Shanghai bourse has dropped to around 20 from the high of 69 in October 2007.
Economists and experts suggest the securities regulator more strictly monitor the amount and frequency of new share issues and tradable share conversions. Statistics show 7 billion non-tradable shares from 98 listed companies could have been converted into tradable ones in June, amounting to 98 billion yuan, down 65 percent from the conversion in May.
Analysts also suggest the government could try speeding up the opening up of the A-share market to foreign institutions by increasing the quotas of overseas capital in the market under the QFII (Qualified Foreign Institutional Investor) scheme.
The total quotas available were raised to $30 billion in December from $10 billion, but as of April, the China Securities Regulatory Commission had approved a total of only $10.57 billion in quotas for 54 QFII institutions. In May, it issued quotas to two more companies, for which the amounts were not disclosed.
均为北京文国网络技术有限责任公司版权所有，未经协议授权，禁止复制下载使用。
