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Analysts: CSRC Perks Make Losers look Good
Some money-losing companies are looking pretty good to some investors in China, Chinadaily reported Sunday.
The reasons for the renewed interest are recent government promptings for the companies to restructure their assets and promises that they will be given autonomy and freedom from administrative red tape if they do.
The China Securities Regulatory Commission (CSRC), China's securities watchdog, issued a circular a week ago concerning the sale and purchase of certain assets of listed companies.
The circular stipulated procedures and requirements for listed companies seeking major asset restructuring that are designed to improve their assets' quality.
It said listed companies no longer need to apply to the regulatory commission to begin major asset restructuring, which allows companies to decide on their own assets sales and purchases.
Analysts said investors are speculating that restructuring will help the money-losing companies become profitable.
In the past, securities authorities only allowed companies with major financial problems to restructure and on a trial basis only.
The circular also requires related companies to provide more transparency in information disclosures and that the whole operation must strictly abide by the law.
These actions are expected to prevent insider trading and short-term speculation, pushing the companies to upgrade their management for a long term perspective.
Analyst said the full exertion of enterprise initiative in the asset reshuffling would lead to a more market-oriented and self-reliant capital operation.
The news gave steam to prices of some of the PT (particular share) and ST (special treatment) companies, and was also a driving force that pushed the indices to new highs last week.
China has already removed the floor of the daily trading limit for companies which had posted net losses for three straight years.
PT shares had been restricted to trading 5 per cent up or down.
The effect also spilled over into counters of companies reporting losses for two years, which punters had been buying on hopes they would be restructured.
The ST firms also have 5 per cent limits, but can still trade daily.
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