Ping An Insurance (Group)'s mega-refinancing plan was dealt a further blow after a mouthpiece of the Communist Party made the rare move of criticising the insurer for treating the stock market as a cash machine.
The People's Daily - which closely reflects official opinion - said Ping An's plan to sell 1.2 billion A shares and to issue 41.2 billion yuan of convertible bonds had triggered heated debate, with investors expressing displeasure by selling down the stock.
'Some companies may take advantage of the policy loopholes and treat the stock market as a cash machine, raising additional capital in large amounts,' the newspaper said. 'This may backfire and investor confidence has already been hurt.'
Based on the A-share closing price on January 18 when Ping An announced the fund-raising scheme, the total amount of the share sale and convertible bonds exceeds 160 billion yuan, making it the largest equity refinancing bid in the country's capital market.
Except for saying that the money would be used to fund mergers and acquisitions 'in line with the company's diversified business strategy', Ping An has not been forthcoming with explaining the use of proceeds.
The newspaper's remarks are expected to add pressure on Ping An to reconsider the share sale, which has also been criticised by some fund managers, or to reveal more details of its purpose.
The company's Shanghai shares have fallen the 10 per cent daily limit on a number of days since the capital-raising plan was announced.
A Ping An spokesman said no further information would be available on the share plan and he would not comment on the newspaper's remarks.
Fund managers and other investors have threatened to veto Ping An's cash call, due to be voted on by shareholders early next month.
'The insurer is not likely to scale down its plan,' said Bonnie Chan, an analyst with China Construction Bank International. 'Ping An is under increasing pressure to disclose more details of its plans.'
The People's Daily also suggested regulators revamp the refinancing rules, citing examples such as only allowing firms to place shares on the market several years after listing.
It said they should also detail the use of proceeds from share placements.
'Obviously the central government wants to support the mainland stock markets through slamming the proposed share sale by Ping An,' said Andy Xie, a market watcher.
Mr Xie said the People's Daily had always urged mainlanders to invest domestically. The latest commentary would have some psychological effect on investors.
Investors have been pressing for measures to restore confidence in the markets amid fears of a global economic slowdown and the impact of the recent snowstorms that have wreaked havoc in the central and southern provinces.