Stock market can't meet cash call

The stock market has become fascinated by preferred stocks since the China Securities Regulatory Commission, or CSRC, said it was working on a plan to allow companies to raise capital by issuing this class of shares.

Many analysts attributed the latest rally, at least partly, to the CSRC's move, arguing that the issuing of preferred stocks would enable enterprises, particularly banks, to raise much needed capital without necessarily draining market liquidity. Unsurprisingly, investors are finding such talk reassuring because the prospect of banks, property developers and many other cash-strapped listed companies flooding the market with new issues of common stock has been weighing heavily on their minds for so long.

Some analysts and market commentators have called the introduction of preferred stocks a big leap forward in financial reform. There were those who predicted that the lifting of the ban on preferred stocks, together with improving economic prospects, would banish the long-reigning bear and usher in the bull.