Chinese stocks close higher after new issues suspended

Chinese stocks closed unusual highTuesday after the government suspended issuing new shares in preparation for the upcoming reform on the method of fixing stock issue prices.

China's Securities Regulatory Commission (CSRC) Monday releasedthe notice to solicit public opinion on fixing stock issue prices by public negotiations on its official website.

Stimulated by the favorable news, the Shanghai A-share Index was up 22.66 points or 1.6 percent at 1,408.13 on turnover of 6.88billion yuan (0.83 billion US dollars), while the Shenzhen A-shareIndex increased by 1.72 percent to 3,394.11 points.

But the notice did not give the accurate time of release of theofficial regulation.

China's two markets, the Shanghai and Shenzhen stock markets, have remained in an almost three-year slump. The current index is about 800 points lower than 2001's high of 2200.

Many investors attributed the long-term suffering to immature approval and supervision mechanisms, which have been criticized for not effectively controlling manipulation and cheating in Chinese stock markets. Investors also complained that the CSRC hadapproved too numerous new stocks in recent years, which dispersed the limited capital in the markets.

Currently, the stock issue price is decided by the listed company and approved by the CSRC. This method has been blamed for not illustrating the real value of the stocks.

As the current prices of some stocks are below their issue prices, the CSRC has long considered reforming the current method of fixing prices. The revised company law approved by China's top legislature on Aug. 28 canceled the clause requiring stock issue prices to be approved by the CSRC.

The notice released on Monday stipulates that the stock issue price should be fixed through public negotiations between the listed company and unit fund investors under a market-orientated mechanism.

Comments on the notice should be sent to the CSRC before September 5. All issues of new stocks will be suspended until the notice is finally completed and opened to the public.

All new stock issue prices will be set in line with the upcoming regulation, which should be officially released in near future, said the CSRC.

Source: Xinhua