276 listed firms will carry stock code prefix as part of efforts to speed up conversion of state-owned non-tradable stocks Mainland-listed companies that have not yet completed their state-owned share reorganisation will be publicly identified by a new stock code prefix as part of the government's plan to speed up the final stages of the landmark reform. From today, the 116 Shenzhen and Shanghai-listed companies that have not yet initiated the reform and the 160 which are still in the reform process will be identified with an 'S' before their abbreviated name and stock code on the exchanges and in all official documents and reports. Previously, companies that had finished the reform were identified with a 'G' prefix but that practice will be dropped from today as the government resorts to naming and shaming those that have failed to come up with a plan to convert their state-owned non-tradable shares into common tradable shares. As many as 100 of the newly labelled S companies are expected to be unable to complete the process for reasons ranging from financial problems to corruption investigations and some may eventually be delisted. 'I am afraid that some listed companies may fail to complete the non-tradable share reform by the end of this year,' China Securities Regulatory Commission executive vice-chairman Tu Guangshao said in a recent interview. 'No regulation regarding the non-tradable share reform requires these companies to be delisted but obviously, some of them eventually will be.' Companies representing almost 95 per cent of the mainland stock market capitalisation have started the reform process, which involves securing shareholder and government approval and implementing a plan to compensate holders of tradable shares for losses that may result from the eventual floating of the state-owned shares. Companies that cannot finish the reform but do not qualify for delisting under current stock exchange rules will not be allowed to raise capital or participate in any of the new derivatives pilot schemes. They are likely to be prime targets for acquisition by competitors and some may be bought by companies hoping to gain a back-door listing. 'You're seeing listed A shares beginning to acquire stakes in other listed companies and bigger players taking over smaller players, in the steel industry, for example,' said JP Morgan chairman of China equities Jing Ulrich. About two-thirds of the stock in each of the 1,290 eligible A-share listed companies are designated as state-owned. Companies that have not yet undergone the reforms include air carriers China Eastern Airlines and China Southern Airlines, as well as a subsidiary of Xugong Construction Machinery, the target of a troubled takeover bid by United States private equity firm Carlyle Group. The reform plan of Shenzhen Development Bank, whose largest shareholder is US private equity firm Newbridge Capital, had been rejected by tradable shareholders who felt they were not being adequately compensated.
