In­vestors brace for bullish mar­ket

China Daily (Hong Kong) - - BUSINESS COMPANIES - By XIE YU in Shang­hai xieyu@chi­nadaily.com.cn

Na­tional in­sti­tu­tions and qual­i­fied for­eign in­sti­tu­tional in­vestors are pre­par­ing for a pos­si­ble bull mar­ket in China, fol­low­ing an of­fi­cial an­nounce­ment that ini­tial pub­lic of­fer­ings, halted since Oc­to­ber 2012, would re­sume.

The State Ad­min­is­tra­tion of For­eign Ex­change said it had ap­proved an in­vest­ment quota of $49.2 bil­lion un­der the QFII plan by the end of Novem­ber, of which $ 738 mil­lion was ap­proved last month.

Block trade plat­form data show that QFII be­came more ac­tive in re­cent months, spend­ing 2.17 bil­lion yuan ($354.6 mil­lion) to buy up 247 mil­lion bank shares in early De­cem­ber, Se­cu­ri­ties Daily said on Fri­day.

Mean­while, the new ren­minbi quota for qual­i­fied for­eign in­sti­tu­tional in­vestors stood at 5 bil­lion yuan in Novem­ber, bring­ing the to­tal in­vest­ment quota for RQFII (RMB qual­i­fied for­eign in­sti­tu­tional in­vestors) to 144.6 bil­lion yuan, SAFE data showed.

“The new list­ings af­ter a 14- month hia­tus broke the ice,” said Zito Ji, a pub­lic fund an­a­lyst in Shang­hai.

“The re­form plan the reg­u­la­tor in­tro­duced will ben­e­fit the long-term sta­bil­ity of China’s eq­uity mar­ket,” Zito said. “There seems to be less risk now that the in­dex will drop.”

The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion an­nounced an IPO re­form plan ear­lier this month and said about 50 com­pa­nies will be ready for IPOs by the end of Jan­uary.

Cur­rently, 760 com­pa­nies have lined up for IPOs in China.

Mean­while, the CSRC is­sued guide­lines say­ing it will push for­ward a reg­is­tra­tion-based ini­tial pub­lic of­fer­ing sys­tem, mean­ing that af­ter com­pa­nies meet cer­tain le­gal and fi­nan­cial re­quire­ments, the mar­ket will de­cide their IPOs’ prices.

“The mar­ket has been hun­gry, with no sup­ply of new list­ings, for quite a long time,” said Vivien Wei, an un­der­writer in Guangzhou.

“Now that the new list­ings are about to come out with a set of re­form poli­cies, it is likely that big funds will raise stakes in the stock mar­ket, es­pe­cially blue chips,” she said.

Mean­while, with the reg­u­la­tor in­tro­duc­ing pre­ferred shares, so­cial se­cu­rity insurance or pub­lic pen­sion funds will have more choices for in­vest­ing, she added.

Com­pared with com­mon stock, shares of pre­ferred stock take pri­or­ity in the dis­tri­bu­tion of cor­po­rate prof­its and upon liq­ui­da­tion, but as de­fined by the guide­lines is­sued by the State Coun­cil, share­hold­ers of such stocks have lim­ited rights in cor­po­rate de­ci­sion-mak­ing,

China is about to let some big banks buy pre­ferred shares on a trial ba­sis first, me­dia re­ports said.

An­a­lysts said the pre­ferred shares — which are sim­i­lar to bonds, of­fer­ing a smoother and more pre­dictable in­vest­ment ride, with lower re­turns but lower risks — are bet­ter in­vest­ment choices for so­cial se­cu­rity funds.

Third- quar­ter fi­nan­cial re­ports of the listed com­pa­nies show edthat China’s so­cial se­cu­rity fund has in­creased its stakes in the stock mar­ket. The fund has in­creased its in­vest­ments in the eq­uity mar­ket for the past five quar­ters.

The as­sets of China’s Na­tional Coun­cil for So­cial Se­cu­rity Fund ended 2012 at 1.11 tril­lion yuan, up 27.5 per­cent from the pre­vi­ous year. The fund en­joyed an in­vest­ment re­turn of 7 per­cent, or 64.5 bil­lion yuan, for the year.

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