The Shanghai and Shenzhen stock exchanges issued new trading rules yesterday,
helping drive the country's stock market to a nearly two-year high.
The new rules, effective from July 1, are the result of a revision according
to the Securities Law and are another important move for the market's
development, industry experts say.
"The improved trading rules will promote market activity and boost capital
liquidity," said Li Yongsen, an economist at Renmin University.
Under the new rules, the two stock exchanges said they will allow trading of
stocks, funds, bonds, bond repurchases, warrants and other types of securities
permitted by the industry regulator.
Details like trading hours, transactions and information disclosure are all
outlined in the new rules.
"The rules also pave the way for possible future reform," Li said.
The new rules stipulate that investments in securities must be held until the
next trading day, except for those that are allowed to be bought and sold on the
same day like bonds and warrants.
This signals that the government may open such trading to stock investors.
"This policy anticipation, as well as other possible innovations, stimulates
market trade," said Chen Weiqing, an analyst from CITIC Securities.
According to Chen, these new reforms are likely to come out together with the
resumption of initial public offerings (IPO) in the near future.
China suspended fund-raising last year as it sought to make US$230 billion of
non-tradable State-owned shares tradable.
On May 8, the China Securities Regulatory Commission (CSRC) allowed listed
firms to issue additional shares and promised to give quality companies priority
to float shares.
The new rules also state that the two stock exchanges can change the daily 10
per cent limit for listed companies after getting approval from the CSRC.
"The stock market gained due to the issuing of the new stock trading rules,
as well as a stronger yuan yesterday," Chen said.
The yuan broke through 8.0000 to the US dollar yesterday for the first time
since China revalued the currency by 2.1 per cent last July.
The benchmark Shanghai composite index rose 3.82 per cent to 1,664.088
points, the highest closing level since June 2004.
The Shenzhen composite index, which tracks the smaller market, gained 4.4 per
cent to finish at 406.97.
Analysts expected the market would stay strong in the near future as more
capital flows in from both individual and institutional investors.
The benchmark index has jumped by over 40 per cent since the beginning of the
year, driven by the government's market-friendly moves.
It has quickened its gains in recent days, advancing 11 per cent last week.
(China Daily 05/16/2006 page11)
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