Local SOEs reform represented by Shanghai has long been the focus of the capital market. Today, the once a year state-owned enterprises (SOEs) reform meeting of Shanghai unveils. Boosted by the proposed new round of in-depth SOEs reform, the listed SOEs based in Shanghai yesterday at one point surged 2 percent. Even though the market in the end declined, the whole sector closed 1.82 percent higher.
As to individual stocks, 37 of Shanghai’s listed SOEs jumped yesterday. Shanghai Dragon Corporation (600630.SH), Shanghai Jin Jiang International Industrial Investment Co., Ltd. (600650.SH) and Shanghai International Port (Group) Co., Ltd. (600018.SH) soared to the daily limit of 10 percent; others such as Shanghai Material Trading Co., Ltd. (600822.SH), Shanghai Shenda Co., Ltd. (600626.SH), Shanghai Maling Aquarius Co., Ltd. (600073.SH), Shanghai Lujiazui Finance& Trade Zone Development Co., Ltd. (600663.SH), Orient International Enterprise, Ltd. (600278.SH), Shanghai Chlor-Alkali Chemical Co., Ltd. (600618.SH) and Shanghai Highly (Group) Co., Ltd. (600619.SH) also increased by 6.62 percent, 6.23 percent, 5.99 percent, 4.99 percent, 4.56 percent, 4.34 percent and 4.03 percent respectively.
As for capital flows, 38 Shanghai listed SOEs saw net inflow of large amount of capitals, with a total of 1,360,053,400 yuan. 25 stocks saw net capital inflow of more than 10 million yuan. Shanghai International Port ranked the top with net inflows of large capital of 271,468,600 yuan, followed by Shanghai Dragon Corporation with net inflows from large capital of 229,992,200 yuan. Shanghai Jin Jiang International Industrial Investment also saw large capital inflows of more than 130,385,800 yuan. Besides, Shang Gong Group Co., Ltd. (600843.SH), Shanghai Tunnel Engineering Co., Ltd. (600820.SH), Shanghai Bailian Group Co., Ltd. (600827.SH) and Shanghai Shenda Co., Ltd. (600626.SH) also saw large capital inflow of 82,488,000 yuan, 81,805,800 yuan, 69,859,600 yuan and 55,890,400 yuan respectively. Net inflows from large capitals of these seven stocks in total reached 921,890,400 yuan.
It is learnt that Shanghai’s state owned assets and SOEs work conference will be held on Thursday afternoon. Responsible persons of SOEs directly controlled by Shanghai State-owned Assets Supervision and Administration Commission (SASAC) will attend this meeting. It is a regular yearly meeting held at around the Spring Festival, to summarize the work of the previous year and arrange the emphases of work in the new year.
Institutions indicate that Shanghai’s SOES reform has experienced three stages: 2012 to 2014 is the stage of top-level design, discussing ways and targets of reform; 2014 to 2016, reform on the group level, when the equity relation between Shanghai SASAC and group companies controlled by it was straightens out. The main achievement is the establishment of two state-owned assets circulating platforms, namely Guosheng Group and Shanghai International Group; 2016 up till now, the focus is on listed SOEs, improving the competitiveness of SOEs through various types of capital operations. The main achievements include: restructuring of Shanghai 3F New Materials Company Limited (600636.SH) and introduce China Wenfa Group as the shareholder; China Universal Asset Management worked together with Guosheng Group to issue the Shanghai SOE reform ETF; Shanghai Municipal Investment (Group) Corporation merged B shares of Shanghai Yangchen Investment.
With the improvement of the top-level design of this round of SOEs reform and expansion and deepening of pilots, the industry widely believes that SOEs reform in 2017 will accelerate. For the moves of Shanghai’s SOEs reform in the next stage, Essence Securities is in the view that the key points are as the following: first, mixed-ownership reform. It includes three ways, namely employee stock ownership plan, introduction of strategic investment and management buyout; second, overall listing of group company or core assets; third, upgrading and optimization of industry. The announcement of employee stock ownership plan at the beginning of the year has just raised the curtain of Shanghai’s acceleration in new round of SOEs reform. It is estimated that other policies will be launched in the near future, including mixed ownership reform, improvement of assets securitization, optimization of industrial layout and etc. Major companies are Shanghai Tunnel Engineering，ShangHai JinFeng Wine Company Limited (600616.SH), Bright Real Estate Group Co., Limited (600708.SH) and Shanghai Pharmaceuticals Holding Co., Ltd. (601607.SH)
As to mixed-ownership reform and M&As, the two main directions of SOEs reform, Great Wall Securities indicates that investors can grasp SOEs reform themed opportunities from the following four aspects in 2017: first, subjects with strong expectation of “supply side structural reform plus central SOEs M&A and restructuring; second, high quality and small cap SOEs shell resource with poor performance; third, listed SOEs under big group companies with strong expectation of mixed-ownership reform; four, local mixed-ownership reform subjects in regions where SOEs reform are at the forefront, such as Shanghai and Shenzhen, for mixed-ownership reform in these regions may take the lead as SOEs reform in such regions developed much faster, and there are less obstacles in these regions due to the market-oriented environment.
Translated by Adam Zhang
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