China will soon issue rules to ban mainland-listed companies
from using stock-sale proceeds to invest in initial public
offerings.
The proposed regulation has scuttled a plan by Financial Street
Holding Co to invest capital in new stock subscriptions using
capital raised earlier, the Shenzhen-listed firm said in an
exchange filing on Wednesday.
Public firms will also be prohibited from investing the money
they raise from stocks, convertible bonds and upcoming financial
derivatives, according to the statement.
The funds can be used only as originally planned, such as
replenishing working capital to focus on the firms' core
businesses, the statement said.
A spokesman for the China Securities Regulatory Commission
declined to comment on the issue Thursday.
China's benchmark Shanghai Composite Index soared 130 percent
last year and continues to rise on improved market fundamentals and
restored investor confidence.
Domestic citizens have been diverting bank savings to securities
investments in pursuit of higher returns.
Many invest in new stocks as mainland firms usually feature
staggering trading debuts amid abundant liquidity.
So far this year, more than 20 listed companies have used 10
billion yuan (US$1.29 billion) from their stock-sale proceeds to
subscribe to IPOs, the Securities Times reported Thursday,
citing its own calculation.
Chinese authorities are preparing to urge listed firms to beef
up information disclosures and adopt new accounting standards as
part of efforts to enhance corporate governance.
(Shanghai Daily March 16, 2007)