Shanghai Stock Exchange, Shenzhen Stock Exchange and China Securities Depository and Clearing Corporation Limited, Market Value Distribution of New Share Issues Implementing Rules

Issued: May 22 2002
Applicability: Market value of listed shares in circulation held by investors is defined as the product of the registered amount of listed renminbi common stock (A shares) in circulation in the stock account of the investor as of the trading day determined by the notice of issue and the total sum of the closing prices of all the shares of the day, including the market value of those shares that are temporarily locked up but are still in circulation (Section One(2)).

Main contents: Section One outlines the allocation process. When an entire new issue is to be distributed in the secondary market, it shall be underwritten by the main distributor (Item One). An account with either the Shenzhen or Shanghai exchange can be used to make one subscription for shares of any one new issue distributed on the Shanghai exchange; the minimum subscription amount is 1,000 shares and greater amounts should be multiples of
1,000. Funds (including open-ended funds) may submit more than one subscription application. Investors do not prepay the subscription amount, but once a subscription is confirmed, it cannot be cancelled (Section One(3)). When total subscriptions exceed the distribution amount, a subscription number will be assigned to each application (Section One(4)). Then at time [t+1] the main distributor shall draw lots, with each number drawn entitling the number holder to 1,000 shares (Section One(5)). The clearing house shall complete settlement and shareholder registration at time [t+3] (Section One(7)). From August 1 2002, accounts lacking an account holder name or an identity card number (or business registration number) will not be permitted to participate in new issue distributions (Section One(8)).
Section Two deals with listing and trading. New shares obtained through distribution by account holders on the Shenzhen exchange can only be sold by delegating the sale to the Shenzhen exchange, which shall issue a sell order notification to the Shanghai exchange (Section Two(1)). The sell orders will become effective when received by the Shanghai exchange (Section Two(6)). Shenzhen shall publish market reports on market value share distributions, but Shanghai exchange market reports will be considered the standard (Section Two(7)). Part Three deals with registration and settlement.
Related legislation: Relevant Questions Concerning the Issue of New Shares to Investors in the Secondary Market Supplementary Circular