Currently more than 200 companies out of more than 1,300 listed firms are able to sell shares in the Shanghai and Shenzhen bourses. Around 30 companies have submitted applications to the CSRC to float more shares.

The figures are encouraging for domestic securities firms and the lifted ban immediately revived their underwriting business.

The ban on share sales in the Shanghai and Shenzhen stock exchanges has thrown securities firms into confusion since May 2005. Most of them have barely managed to scrape by over the past 12 months.

Some have been able to make money by servicing listed companies to convert non-tradable State-owned shares. But these profits are nothing compared to the income that can be generated by underwriting.

"A securities firm can get commissions of between 1.5 and 3 per cent by underwriting new share sales. But the profit from servicing listed companies to convert shares is only one-tenth of the underwriting business," Dong Chen, an analyst with CITIC Securities, told China Daily.

Up until April, 70 per cent of listed companies had completed the conversion of their non-tradable shares into tradable ones. With the lifting of the ban, securities firms could shift their focus from reforms to the flotation of new A shares.

CITIC's Cheng pointed out that as nonferrous metals including copper, aluminium and gold will continue to climb, investors should also pay attention to the possible rise of steel and construction materials shares based on speculation that they will recover from the slump.

China kicked off its securities reform and suspended simultaneously the launch of IPO and share sales on April 29, 2005. A shares have staged a strong rebound in 2006. The benchmark Shanghai composite index has increased 27 per cent since the beginning of 2006.

(China Daily 05/09/2006 page11)

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