CHINA is considering allowing the country’s insurers to issue preferred shares in a bid to offer more funding options for the sector, a domestic paper said Friday, citing sources.

    The country’s insurance watchdog sent a circular to firms Thursday seeking feedback on the issuance of preferred shares, Shanghai Securities News said. The regulator asked for responses by Sept. 24.

    China unveiled rules at the end of last year to open up preferred shares to the banking sector. These securities are seen as providing a much-needed new fundraising channel.

    Preferred shares are a form of hybrid security with characteristics of debt and equity. They enjoy seniority over common stockholders in the event of bankruptcy, but in other respects they have limited impact on common shareholders.

    The circular from the China Insurance Regulatory Commission said China’s insurers will be able to issue preferred shares through public and private channels, the paper said.

    The amount of preferred shares will be limited to 50 percent of common stock and 50 percent of net assets, the paper added.

    China published detailed rules on commercial bank issuance of preferred shares in August, paving the way for lenders to begin fundraising designed to enable them to withstand an expected rise in bad loans.

    Stock market investors have been eagerly anticipating the introduction of preferred shares, hoping they will allow listed companies to raise necessary funds from stock markets with minimal dilution on equity valuations.

    Preferred shares do not typically trade on the open market, carry no voting rights, and do not dilute net profits attributable to shareholders.

    (SD-Agencies)