China maiden state share reform gets mixed response

Public shareholders of a firm picked as a test case in China's renewed attempt to sell more than $200 billion in untraded government-held stock did not back the plan, while shareholders in another company voted in favour.
Computer services firm Tsinghua Tongfang Co Ltd won 62 percent of votes from non-government shareholders for a plan to unload its state shares, short of the two-thirds needed, the company said in a statement published on June 11.
Shareholders of machinery maker Sany Heavy Industries Co Ltd approved a similar plan, the company said.
"We regret that our plan failed to win shareholders' approval," Tongfang's Chairman Rong Yonglin said in a statement published in the official Shanghai Securities News. "That may spark a fall in our firm's shares and cause investor losses."
Tongfang and Sany are among four companies picked to pioneer reform in state shares, a legacy of a centrally planned economy that has weighed on China's stock markets for years. Trading in their shares has been suspended since late last week.
The other two test cases, packaging materials firm Shanghai Zi Jiang Enterprise Group Co Ltd and coal producer Hebei Jinniu Energy Resources Co Ltd, will convene shareholders' meetings next week to debate the same moves.
While state share owners in the four pioneering companies have promised big compensation to public shareholders, investors focused more on corporate fundamentals.
"One of the key reasons for Tongfang's failure was its unimpressive earnings records over the past few years," said Dong Lianghong, a fund manager at Boshi Fund Management Co Ltd.
Beijing wants to sell state-owned shares, which account for two-thirds of mainland market capitalisation, to help fund its social welfare system and enhance market transparency.
Markets plunged some 30 percent in the months after the first sell-off was tried in 2001, forcing regulators to drop the plan.
The second time around, regulators have vowed to control the pace of new shares flowing into the market. Even after winning shareholder approval, state shares can only be listed after 12 months, according to guidelines issued in late April.
As a result, the revival of the sell-down will take years to complete, analysts said.
Still, the key Shanghai composite index has fallen 4.4 percent since April 29, when the new effort was announced.
The index is down 12.5 percent this year. It fell 15 percent in 2004 to rank as the world's worst-performing major index.