Looser rules on private share sales in China have prompted a flood of issuance, as cash-strapped companies try to fortify their balance sheets against hits from the coronavirus outbreak, reported the Financial Times.
More than 100 listed companies have raised RMB 209 billion ($30 billion) through private placements since February 14, when domestic regulators relaxed restrictions, according to data provider Wind. That is an increase of more than 800% on the same period in 2019.
But some have warned that Beijing’s decision to allow greater leeway for private placements, which involve the sale of often discounted shares directly to select groups of investors, could encourage market manipulation. “Private placements create ample room for corruption,” said Bo Zhuang, an analyst at TS Lombard in Singapore.
However, such concerns have taken a back seat as Beijing tries to reboot the world’s number two economy with measures such as debt relief and cheap loans for businesses affected by travel restrictions and forced quarantines. Loosening rules on private placements is designed to help companies “combat the virus and return to normal operation”, the securities regulator said last month.