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Sinopec to join China state-share reform

(Reuters)
Updated: 2006-08-21 09:34

Shanghai - Asia's largest oil refiner, Sinopec Corp. , said on Monday it would join China's programme to convert non-tradable shares held by the state into free-floating shares tradable on the stock markets.

Sinopec is the last top company among over 1,400 firms listed on the Shanghai and Shenzhen stock exchanges to announce it is taking part in the reform, which is crucial to the development of the markets because it aims to remove an overhang of some US$250 billion of untraded equity.

The programme was launched in April 2005, and regulators have said it will basically be completed by the end of this year. Sinopec's announcement means companies accounting for over 90 percent of the markets' capitalisation have said they will join the scheme or have completed it.

Sinopec's Shanghai-listed shares were suspended indefinitely with immediate effect, the company said in a statement. Previously, companies announcing the reform have typically been suspended for around three weeks.

Sinopec is the second biggest blue chip listed in China's domestic stock markets, accounting for some 12 percent of market capitalisation. Its suspension will temporarily give even greater weight to the biggest stock, Bank of China , which now accounts for around 15 percent of capitalisation.

Sinopec said in a separate statement in Hong Kong that its H-shares listed there would not be affected and would trade normally. The company is also listed in New York.

The company did not give details of its reform plan, but previously, companies taking part have typically offered holders of domestically listed shares cash, bonus shares and warrants as compensation for the dilution involved in the reform. Shareholders of overseas-listed shares have not been compensated.

The China Business News said Sinopec would announce details of its compensation plan on Monday next week, and that its compensation would not exceed that offered by China United Telecommunications Corp. .

China Unicom, a mainland-listed unit of the smaller of the country's two cellular carriers, gave domestic investors a 2.8-for-10 bonus share issue as compensation.

Sinopec's reform is expected to pave the way for similar moves by its units listed on both mainland and overseas bourses, including Shanghai Petrochemical Co. Ltd. and Yizheng Chemical Fibre Co. Ltd. .