China stock market

Shandong-based companies jump after it becomes latest Chinese province to join bailout rush

  • The Shandong provincial government plans to launch a 10 billion yuan fund to bail out cash-strapped publicly traded companies
PUBLISHED : Friday, 16 November, 2018, 3:30pm
UPDATED : Friday, 16 November, 2018, 11:01pm

Gettop Acoustic and Shandong Weida Machinery led the gains among publicly traded companies based in the eastern Shandong province after the local government said it would provide funding to cash-strapped firms.

Shandong joins Shanghai, Guangdong, Zhejiang and Fujian governments that are trying to defuse the risks linked to forced sales of shares pledged as collateral for loans after President Xi Jinping and top financial regulators from the central bank to the stock market watchdog vowed to support growth of the private sector.

China’s troubled private listed firms offered billion-dollar bailouts

Gettop Acoustic and Shandong Weida both surged by the 10 per cent daily limit on Shenzhen’s board for small and medium-size enterprises on Friday trading. They were among the six Shandong-based companies that were limit up after China Securities Journal reported that the provincial government will set up a 10 billion yuan (US$1.4 billion) fund to bail out companies facing funding difficulty.

The report said that Shandong Guohui, an investment arm of the provincial government, and Zhongtai Securities, a state-owned brokerage, will each contribute 1 billion yuan to the bailout fund, who will then inject funds into Shandong-based listed companies through either equity investment or debt. The fund will raise the remaining 8 billion yuan from various entities including banks, state-owned enterprises and government platforms.

Gettop Acoustic and Shandong Weida owe 585.3 million yuan and 587.3 million yuan respectively in debt.

Gettop Acoustic jumped to 8 yuan on Friday, trimming its loss for the year to 17 per cent, while Shandong Weida surged to 6.36 yuan, paring the decline in the same span to 21 per cent.

Among other gainers, Synthesis Electronic Technology also jumped 10 per cent to 15.96 yuan and fertiliser maker Kingenta Ecological Engineering Group climbed 3.9 per cent to 6.47 yuan.

China’s stock regulator promises to protect investor interests as the market falls to four-year low

China’s privately-owned, small listed companies have pledged shares worth 4.9 trillion yuan in market value as collateral for loans. The debtors were facing margin calls on their loans that would have seen banks liquidate the stocks, with the sour sentiment on the broader market crimping the value of pledged shares.

So far, China has successfully arrested the decline on the stock market, thus avoiding forced sales of the pledged stock. The Shanghai Composite Index has rebound 7.8 per cent since touching a four-year low last month.