Stock market woes not due to share glut, says report

By Wang Yanlin  |   2008-6-10  |     ONLINE EDITION

SHARES that hit the market after their lock-up period expired was not the main cause of faltering stock markets, said a report by the Shenzhen Stock Exchange today.

"The amount of new shares is very limited. Plus, the number of such sales has been reduced tremendously after shareholders with over a 5 percent stake were required to file public statements before they sell," said the report.

It said in December last year that transactions of new shares reached a peak after the lock-up period expired. But even then, those shares only accounted for 1.18 percent of total trading on China's two bourses.

On average, the transaction of such shares made up 0.53 percent of total trading each month since August 2006.

"Thus people can't blame the liberalization of new shares for the recent correction on the stock markets," said the report.

The benchmark Shanghai Composite Index has dropped from 6,124.04 in October last year to about 3,200.

Many people attributed the sharp volatility in stock markets to the supply of new shares, which entered the market in comparatively large quantities since the end of last year.

To bolster the stock market and improve the transparency of such deals, China's securities regulator in April required big shareholders to move to a block trading platform if they hope to sell more than 1 percent of a listed firm's total shares within a month.

Last month, the regulator further strengthened the rules by asking shareholders to file a statement within three trading days if they hope to sell more than 5 percent of a listed firm's shares after a lock-up period expires.

In the report, the Shenzhen Stock Exchange also said if a company performed well, it was less likely that a shareholder would sell a stake.