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Shanghai index regains 2,000-point level, helped by lenders
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SHANGHAI stocks rebounded today, sending the benchmark index above the 2,000-point mark, as lenders rallied amid speculation China’s securities regulator will soon allow them to issue preferred shares.
The Shanghai Composite Index rose 1.1 percent, or 21.42 points, to 2,019.11. Turnover was 78 billion yuan (US$12.8 billion) at the trading close.
The banking sector led the gains of financial stocks amid reports that the China Securities Regulatory Commission may launch a pilot program to issue preferred stocks as soon as this weekend.
The CSRC has solicited public views on draft rules governing preferred stocks, a hybrid financial instrument comprising both equity and debt. Preferred shareholders enjoy priority over common shareholders on earnings and assets in the event of liquidation.
According to the draft rules, the pilot program will be carried out by 50 companies tracked by the SSE 50 Index. Analysts expect banks to be the biggest beneficiaries.
The selling of preferred stocks offers lenders an additional financing tool, enabling them to meet the tougher Basel III capital requirement, yet not diluting the value of common shares, analysts say.
MSCI Inc, a leading provider of equity, fixed income and hedge fund indices, proposed to partially include China’s yuan-denominated A shares in its Emerging Markets Index, according to a press release on MSCI’s website yesterday. It plans to include 5 percent of A-share market capitalization, starting in May 2015.
CITIC Securities said today the inclusion of A shares in the widely tracked index will lure 10 billion yuan worth of foreign funds into China’s stock market.
“That will briefly boost investor sentiment but won’t offer material benefits. It is unlikely to reverse the weak market in the short term,” said the brokerage.
Shanghai Pudong Development Bank Co Ltd jumped 3.3 percent to 8.84 yuan. China Minsheng Banking Corp Ltd climbed 1.1 percent to 7.63 yuan. Agricultural Bank of China Ltd added 3.1 percent to 2.36 yuan.
Distilleries also advanced. Kweichow Moutai Co Ltd rose 4 percent to 164.87 yuan. Shanxi Xinghuacun Fen Wine Factory Co surged by the daily limit of 10 percent to 17.44 yuan.
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