Across The Border | Listed mainland companies find unique way to boost earnings
Data provider Wind Information says 767 mainland-listed companies, invested a combined 763bn yuan into wealth management products in 2016, up 39pc
Mainland companies are using their idle capital to invest in the stock market in the hope of super-charging their earnings, raising concerns that the funds they raise through IPOs and share placements are not being channelled into their businesses in a proper way.
According to Shanghai-based data provider Wind Information, 767 mainland-listed companies, equivalent to more than a fourth of all stocks traded on the Shanghai and Shenzhen stock exchanges, invested a combined 763 billion yuan into wealth management products in 2016, up 39 per cent from a year earlier.
“Investors are given a rude reminder again that money given to public firms to enhance corporate performance hasn’t been properly utilised,” said Zhou Lin, a hedge fund manager at Shanghai Shiva Investment. “The need for cash doesn’t necessarily mean that companies are determined to fine-tune operations.”
Investors are given a rude reminder again that money given to public firms to enhance corporate performance hasn’t been properly utilised
Among the 763 billion yuan capital, 58 per cent was derived from the proceeds raised via initial public offerings (IPOs) or share placements, Wind said.
The return rates for the wealth management products are still unknown before the companies publish their full-year earnings reports for 2016.
Wealth management products refer to investment products issued by banks, hedge funds, mutual funds, brokerages and trust firms, which are normally invested in financial assets or lent to corporate borrowers at a lofty interest rates higher than bank loans.
The 767 listed companies bought 552.6 billion yuan worth of wealth management products issued by commercial banks, or 72 per cent of the 763 billion yuan invested by listed firms in the financial products.
