Tuesday, March 20, 2007

China Bars Firms Speculating With Stock-Sale Funds

another step to dampen speculation etc. so far without success. http://tinyurl.com/2mwb5s .

here is a very good piece from paul kasriel / northern trust on the not effective china moves http://tinyurl.com/3bupm9 (pdf)

but there is hope that all the combined action (rate hikes, reserve requirements etc) will work over time.

ein weiterer versuch die spekulation einzudämmen. bisher ohne erfolg.(siehe links oben)

aber immerhin besteht aussicht das alle aktionen (zinserhöhungen, reserveanforderungen etc) zusammen irgendwann wirkung zeigen.

March 20 (Bloomberg) -- China's securities regulator barred companies from using proceeds from share sales to invest in stocks, in an attempt to damp overheating financial markets.

Companies are also banned from buying derivatives and convertible bonds with share sale proceeds, the China Securities Regulatory Commission said in a statement today. The Beijing- based regulator said it will monitor companies more closely. ( why so late? looks like the watchdog was asleep.../warum nur so spät? sieht so aus als wenn die behörden bisher recht lax vorgegangen sind)

``Regulators are concerned that proceeds are fueling the stock market frenzy,''..... ``The government wants to start seeing more of that money reinvested into the companies or distributed as dividends.''

China wants to curb speculation in the real estate and stock markets to break boom-bust cycles fueled by 33.5 trillion yuan ($4.3 trillion) of household and corporate deposits. China's cabinet approved a task force last month to clamp down on illegal share sales and other banned activities.

Since January, the nation's banking watchdog has also cracked down bank loans used to invest in property and shares. The benchmark Shanghai and Shenzhen 300 Index more than doubled last year.

Market Bubbles
Zhengzhou Yutong Bus Co. and Finance Street Holding Co. are among the companies that said this year they plan to use some of the proceeds from prior share sales to invest in the initial public offerings of Chinese companies. Zhengzhou Yutong Bus is the China-based partner of MAN AG and Beijing-based Finance Street Holding develops property.

The Shanghai-Shenzhen 300 Index gained 156 percent in the past 12 months after China ended a one-year ban on domestic stock sales in May. The government must pay attention to ``bubbles'' in the stock market before they get too large, Cheng Siwei, vice chairman of the Chinese legislature, wrote in a Feb. 6 commentary in the Chinese-language Financial News.

In December, China's banking regulator sent out a statement, urging banks to stop lending for stock investments and to recall outstanding share loans. In January, the watchdog told domestic banks to strengthen efforts to rein in property loans to help slow an economy that grew the fastest in 11 years in 2006.

Previous Crackdowns
``The Chinese government similarly cracked down on share sale proceeds going into stocks in 1996 and 1997, when the markets were also soaring,'' said Stephen Green, senior economist at Standard Chartered Plc in Shanghai.

Publicly traded companies must use share-sale proceeds as outlined in their prospectuses unless their stockholders approve changes, the securities regulator said today.

Financial institutions such as China Life Insurance Co. and Ping An Insurance (Group) Co., the nation's two largest insurers, will still be able to invest in equities as allowed under their business scope.

Ping An made 4.3 billion yuan -- more than a third of its total investment income in the first nine months last year -- from equities and mutual funds, according to its domestic share sale document. The Shenzhen-based insurer raised $5 billion in a share sale in China this year.



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