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Market prices rule on stake disposal

By Winny Wang | March 19, 2009, Thursday | Print Edition

CHINA will require shareholders to sell state-owned stakes in financial institutions at market prices to prevent the erosion of state-owned assets, the Ministry of Finance said.

The stakes in listed financial institutions must be sold at not less than their weighted average market price, according to rules published by the ministry on Tuesday. The rules, which will take effect in May, also stipulated that stakes in unlisted financial institutions can only be sold at a price based on proper evaluations of their assets.

All stake transactions must be conducted via a public trading system, the rules said.

''Many medium and small-sized banks are eager for investments, and the rules require that the stake transfer be done at a market price to help prevent an erosion of assets and financial risks,'' said Chen Jiaoji, an analyst at Qilu Securities Co.

The rules stipulated that shareholders must gain approval from the ministry when they plan to sell more than 5 percent of their stakes in the financial institutions within a year.

''The new rules will help standardize the transfer of state-owned assets in financial institutions, enhance supervision and management of the transfer, as well as prevent the erosion of the assets,'' the ministry said.

Foreign investors who plan to sell state-owned stakes in financial institutions also need the ministry's nod, the rules said.

Some foreign investors chose to sell out their holdings in major Chinese lenders due to the global financial crisis. The Bank of America already sold US$2.8 billion of China Construction Bank H shares, and RBS joined UBS AG and Hong Kong billionaire Li Ka-shing in selling their H shares in the Bank of China.

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