China firms in US$10 bil share sale rush after funding rules eased

SHANGHAI: Listed Chinese companies are queuing up to issue shares and have already announced plans to raise more than US$10 billion in the past week after fundraising rules were relaxed to help ease cash strains caused by the coronavirus.

The new rules allow companies to sell shares worth up to 30% of their share capital via private placements compared with 20% previously. The number of investors allowed to participate in such placements was lifted to 35 from 10. The rush to market comes as China has been pumping liquidity into the financial system, cutting interest rates as well as easing other funding avenues, in a bid to limit the economic damage from the coronavirus that has killed over 2,000 people and stalled many business activities.The blue-chip CSI300 has rebounded roughly 13% from a low hit on Feb 3 when traders returned after the new year break, compared with 3.8% for the US S&P 500 benchmark over the same period.

“Investors are encouraged by monetary easing, and are looking beyond the epidemic,” said Wu Kan, a portfolio manager at Soochow Securities Co.Relaxation of the rules comes as a relief to many companies. More than 75% of respondents in a survey of over 140 companies by Sealand Securities, said the epidemic was straining their liquidity, with smaller firms saying they will burn through their available cash within three months unless the situation normalises.

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