THE share price stabilisation scheme proposed in the Shanghai Petrochemical prospectus will not be allowed to operate in Hongkong when the issue starts trading on Monday. The Securities and Futures Commission (SFC) has taken a firm line that the sponsoring banks may not move into the market to support the price by offering to buy at a set level - so setting a floor. This, says the SFC, would be in contravention of Section 135 of the Securities Ordinance, which deals with false markets and trading, and specifically forbids the buying and selling of shares for the purpose of stabilising the price. What the sponsors - Merrill Lynch, and Peregrine Capital - will be allowed to do is to ''cover'' the issue and buy shares to meet demand from outside Hongkong. So, if there is real demand from US or other international investors disappointed at the amount of Shanghai Petro stock they have been allocated under the separate offering, the houses will be able to meet the demand by moving into the Hongkong market. The international tranche of the Shanghai Petro offering was 840 million shares, half the 1.68 billion on offer. A further 252 million shares are available to meet excess demand. At the time the flotation was arranged, the market hardly considered it necessary for a support system to be put in place, as the demand was expected to be heavy. But following the cool response to the issue in the wake of the economic problems in China, and a lukewarm welcome from analysts, an exciting debut is now regarded as unlikely. The final issue price in Hongkong, to be decided on Saturday, will be the equivalent of the level fixed in the US for the American depositary receipt offering. If this is less than the initial $1.74 at which Hongkong investors subscribed for the shares, the final price will be lowered, and territory buyers will be refunded the difference on Monday. The prospectus stated that the lowest price was ''expected to be not less than $1.55''. Although any support operation that appears to contravene Section 135 has been ruled out for the Shanghai Petro issue, it will not necessarily continue to be outlawed in Hongkong. The SFC is believed to be open to suggestions for modifying the system if it is seen to be to the benefit of Hongkong's development as an international financial centre. Even the hard-line Securities and Exchange Commission in the US is content with the stabilisation programmes that US issuers mount to maintain the price of stocks - although the trading screens carry a special code to show that a support operation is in place.