| Collect funds or enclosure money? | |
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| Feb 27, 2008 03:31 |   |
 | In recent days, Ping'an Insurance, Pudong Development Bank and other listed companies have been planning to issue convertible bonds in the stock market to collect funds. It is said that Ping'an Insurance intends to collect about 160 billion yuan. Influenced by this, the mainland stock market slumped seriously in recent five days. Many investors blame those listed companies and think that they should be reponsible for the slump in the stock market. A survey suggests that 72 % netizens think those listed companies who intend to collect funds through issue convertible bonds are the main culprit for the slump in the stock market. about 71 percent people think that CSRC should force those listed companies to stop their plan. When asked whether those listed companies issue convertible bonds to collect funds or just enclosure money from the market, 97% think that they just enclosure money. On the other hand, they think that CSRC should make relevant provisions to regulate those listed companies. What do you think of those listed companies? Are they the main culprit for the slump in the stock market? |
| Feb 29, 2008 07:21 | #1 |
| If they can offer bonds at a competitive price and money is switched into them, then that is exactly what should happen. That is market forces at work. If the market slumps, too bad, as the funds were seen to be sitting in less efficient invetsment vehicles. Of course there must be regulations just like banks are required to hold a certain amount of their deposits as cash (ie invested in goivernment bonds), and rules on the way they advertise and operate the bonds. |
| Feb 29, 2008 20:14 | #2 |
| Increase reserves, interest rate and issue of treasury bill/bond are macro maninulation of excessive money supply. Bonds with guaranteed high interest payment attracts a certain amount of cash flowing into bond market from stock market. Listed company in mainland china, normally speaking, have qualified financial positions and raising debt should have regulatory standards like debt/equity ratio, accounts receivable turnover, short term quick ratio, etc. I think buy high quality bonds is a better alternative than taking high risk in equity market. Convertible bonds eventually would be transformed to capital locked in the equity-stock, I am wondering if Pinan insurance are suffering from cash flow problem resulting from huge loss payout for recent snow storm. |
| Mar 2, 2008 19:29 | #3 |
| " I am wondering if Pinan insurance are suffering from cash flow problem resulting from huge loss payout for recent snow storm." I don't know how much Ping'an has paid for the snow storm. As the report says, CSRC (China Security Regulatory Commission) has invloved in this matter. On the other hand, those investors in the stock market have been hurt deeply. Did you remember PetrolChina? At the beginning, the share price was above 40 yuan. Righ now, it has declined to 20 yuan. Those who invest in PetrolChina have been trapped in this company who was famed as the biggest listed company in the world. Having witnessed this, how can these investors believe the listed companies? |
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