A large number of non-tradable State shares can be converted
into tradable equities this month, a move analysts say may trigger
stock market volatility.
Around 9.16 billion non-tradable shares from 119 listed
companies with a total market value of 84.3 billion yuan can be
publicly traded in April, double the number released in March,
according to Shanghai Gildata Service Co Ltd, a financial
information provider.
Analysts warned that investors should remain cautious on the
large-scale unlocking of non-tradable shares, especially as the
mainland stock market has hit a psychological high point.
"The large-scale release of non-tradable shares will trigger
fluctuation of equity prices, because the market will need time to
absorb the large supply of scrips," said Zhang Yidong, an analyst
at Industrial Securities.
Up to March, only about 1.1 billion non-tradable shares from 84
listed companies were unlocked under the nationwide stock reform of
May 2006. "The unlocking could be a factor leading to stock price
volatility, but it will not influence the mainland stock market
fundamentals, underlined by plentiful liquidity and rising
corporate profits," said Chen Wenzhao, an analyst at Changjiang
Securities.
The number of unlocked non-tradable shares from minority
shareholders those who own less than 5 percent of a company's total
issued capital will largely increase in April. There will be a
total of 113 companies with 4.2 billion non-tradable shares held by
minority shareholders to be unlocked in April, up 127 percent from
March.
According to statistics compiled by the China Securities
Journal, 42 companies sold 384 million shares in March, of which 67
million shares were sold by majority shareholders. The average sale
of non-tradable shares by majority shareholders accounted for 4.38
percent of their original holdings.
"It is more likely for majority shareholders to make a quick
profit when the stock price surges to new heights," said Zhang.
The average unlocking price from majority shareholders was 13.09
yuan apiece in March, higher than that of minority shareholders at
10.76 yuan per share, according to Gildata.
Based on information provided by listed companies, most
non-tradable shares 5.9 billion shares worth 19.8 billion yuan, or
64 percent of the total will be unlocked in the middle of this
month. And 1.9 billion shares worth 16.7 billion yuan will be
unlocked at the beginning of the month, with 1.3 billion shares
worth 17.7 billion yuan released at the end of April.
(China Daily April 5, 2007)