China to curb shares boom

China has sought to slow the rush into Shanghai stocks by limiting the power of companies to reinvest share sale cash in other instruments. Read original article

The move is part of a strategy to regulate China's booming stock market and curb runaway equity prices.

The China Securities Regulatory Commission has decreed that firms must consult shareholders before reinvesting large amounts of raised capital.

The rules are intended to curb any misuse of cash raised by flotations.

Money worries

The new rules mean that any business intending to reinvest more than 10% of newly raised funds must get board approval and conduct an online shareholder vote.

Yan Li, an analyst with Beijing-based Southeastern Securities, said the regulation reflected official concerns about the huge sums of money pouring into Chinese stocks.

Zhou Zhengqing, a former chairman of the Regulatory Commission, said the current rate of growth in Chinese stocks was basically healthy.

The global interest in Chinese stocks remains undeterred, despite the shares sell-off prompted by a fall on the
Shanghai bourse earlier this month.

Tie-up talks

In a separate development, the Reuters news agency - citing unnamed sources - reported that Wall Street giant JP Morgan is in talks with China's Bohai Securities in a move aimed at setting up a joint share-dealing operation.

If successful the move would see JP Morgan joining other leading US banks such as Goldman Sachs in running a Chinese brokerage arm.