China’s Social Security Fund is missing out on investment opportunities as some state-owned companies are raising money through private placements, bypassing the national pension fund.
Citic Securities and Haitong Securities are awaiting regulatory approval to raise a combined US$9.4 billion from Hong Kong private placements, rather than public sales of stock, the Wall Street Journal reported.
Any Chinese state-owned firm that sells shares either through an initial public offering or a block trade has to separately give the pension fund stock valued at 10 percent of the amount it has raised from the sale.
That chunk of shares comes out of the holdings of the state firms that control the company making the offering.
But by conducting a private placement, in which shares are sold to no more than 10 investors privately, the state-owned parent companies are able to skirt the requirement to contribute stock to the pension fund, the report noted.
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