Foreign capital has little to gain from restructure
- Source: Global Times
- [09:25 August 12 2010]
- Comments
By Zhou Mi
The current round of restructuring by State-owned enterprises in Shanghai could provide limited opportunities to foreign investors, an expert told the Global Times Wednesday.
"Foreign investors might be able to seek some opportunities in a few industries that restructure, but only to a very small degree," Cai Junyi, an analyst from Shanghai Securities, said. "There might be more investment opportunities opening up when the restructuring plan enters its next phase, which will involve State-owned companies opening up to more outside equity investment."
The State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government is rushing to meet a target laid out in the central government's 11th Five Year Plan, covering 2006 to 2010, which calls for the securitization of 30 percent of the city's State-owned assets.
By the end of 2009, Shanghai had securitized 25.4 percent of its State-owned assets, the municipal government previously announced.
However, to achieve the goal set out by the central government, Shanghai still needs to transfer 27 billion yuan ($3.99 billion) worth of assets to public shares, China Business Journal reported on Saturday.
"Shanghai has to move really fast to meet the deadline," Li Mingliang, an analyst from Haitong Securities, told the Global Times Wednesday.
An unidentified official from the commission said the authority has so far restructured State-owned assets in four industries - non-metallic mining and prospecting; other mining; paper making; and handicrafts - out of the seven target industries for this year, Shanghai Youth Daily reported Wednesday. The remaining three industries - thought to be fur, leather and wood processing - will be covered within the next four months.
Cai said that the common restructuring practice is for State-owned assets in State-owned enterprises to be transferred into public shares, either through the injection of assets into the listed arms of the enterprises or, where no listed arm exists, by establishing one.
Nine State-owned companies in Shanghai have suspended the trading of their stock on the Shanghai Stock Exchange during the past three months, with wide speculation that the companies have done so as they plan to restructure.
The stock price of Qiangsheng Holdings, a listed subsidiary of taxi operator Shanghai Qiangsheng Group, soared to the daily limit of 10 percent on August 2 - the first day it resumed trading following its two-month-long restructure.
Cai added that buying stock in the listed subsidiaries of State-owned enterprises before they restructure is a good move for investors, as the stock price tends to go up, although he added the rise tends to tail off once restructuring is complete.
