The reorganization of the scandal-hit China Southern Securities is likely to cause losses to its shareholders including several listed companies.

Listed entities that hold shares in China Southern Securities Co issued circulars yesterday predicting losses on their investment in the securities house after the government's take-over.

They include the Shanghai-listed Beijing Capital Co Ltd, a water and utilities company, and Shanghai Automotive Co Ltd. Each of them holds a 10.4 per cent stake in the securities house and are the biggest shareholders.

The companies are still awaiting auditing results from the debt-ridden securities house to give the exact evaluation of the losses and impact.

Another four listed companies also hold shares in the company and made similar announcements.

The Shenzhen-based China Southern Securities was taken over by the China Securities Regulatory Commission (CSRC) and the municipal government of Shenzhen last Friday. Regulators said the company had many problems in management and internal controls, which led to a deteriorating financial status and no self-rescue plan could help.

Before that, the company was reported to have embezzled many client guarantee funds and owe billions of yuan in debt that it could not repay.

A special team has been sent by the regulators to take over the management of the company, one of the biggest brokerages in China.

Niu Guanxing, head of the panel, told reporters that the company has been maintaining normal business operations over the past few days and that trading outlets were still functioning well.

He also ensured the safety of the investor's guarantee fund and timely payment of interest.

Niu is also the chairman of the China Merchants Fund Management Co, the first Sino-foreign fund management joint venture in China, and the former president of the China Merchants Securities Co.

"We all come to the office every day and do our daily work as usual. Personally I don't feel much difference,'' a staff member at the Beijing branch of China Southern Securities said yesterday.

Analysts said the official take-over of the securities house is a rare move, but also a necessary one to keep it in business and avoid turmoil in the financial market.

But government interference will not last long because the company will have to eventually operate on its own and find a way out.

Insiders said it is possible the company will be acquired by another securities firm.

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