Shanghai bourse urges firms to raise investor payouts

Shangai market

Firms listed on China's largest stock exchange will have to pay dividends of more than 30 percent of annual profit or face stricter disclosure obligations, the Shanghai Stock Exchange said, extending the authorities' push to lure investors back to the country's markets.

The guidelines, published on the exchange's website on Monday, said that companies which failed to meet the 30 percent level will have to release a statement from the board of directors to offer a detailed explanation for the low dividend payout and the intended use of the undistributed cash. China is trying to draw investors back in to its flagging markets, which have fallen over 30 percent since 2009 and been dogged by issues such as poor transparency.

At the other end of the spectrum, companies that surpass the exchange's guidelines, will be given preferential treatment.

Companies with a dividend payout level of over 50 percent of profit and which hit other set metrics will be given "fast channel" treatment by the Shanghai exchange in refinancing and merger and acquisition activity, the statement said.

Chinese regulators have increasingly given rhetorical support for reforming markets to make them more investor focused and taken steps to increase incentives for shareholders. A sliding scale for tax on dividends came into effect from the start of the year to encourage greater interest in China's markets. China's benchmark indexes fell some 22 percent in 2011, but made slight gains in 2012.

Last year, China urged fee cuts and share buy backs to boost the investor environment, and there are currently plans to allow eligible securities houses and asset management units to develop and manage mutual funds to reinvigorate investment.

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