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Asset injections to SOEs expected

By Fei Ya (China Daily)
Updated: 2007-03-05 09:10

Without a doubt, the cosset of the A-share market in the past few weeks has been "asset injection." Investor speculation on possible asset injections has created dramatic changes in share prices on related public companies.

"Asset injection" a term for the process by which "SOEs list their entirety" refers to the injection of high-quality assets from State-owned enterprises (SOEs) into their subsidiary listed companies.

The trend is based on the expectation that the restructuring of China's SOEs, especially those directly owned by the central government, will improve the competitiveness of SOE-held public companies.

The expectation was inspired by a government guideline released in December by the State-owned Asset Supervision and Administration (SASAC). The guideline urged high-quality SOEs to either directly go public or inject their high-quality units into their existing listed companies after restructuring.

Meanwhile, China's successful securities reform, which had converted State-owned, non-tradable shares into tradable shares since April 2005, has provided a solid foundation for SOEs to go public.

Since the completion of the securities reform, the interests of major shareholders, top managers and small shareholders have become interconnected, encouraging shareholders to increase their company's competitiveness.

Several public companies have recently announced asset injection plans or are expected to launch such plans soon.

Hudong Heavy Machinery Co Ltd

Hudong Heavy Machinery Co Ltd said in a January 29 announcement that it will issue 400 million shares to buy from major shareholders, including its parent company China State Shipbuilding Corporation, a package of high quality assets. By February 16, the Shanghai-based company's share price had jumped as much as 136 percent.

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